Direct Financial Assistance: Circuit Breakers and Tax Credits

Another important category of property tax relief operates like a safety valve for your finances. These programs are often called “circuit breakers.” The name is an excellent metaphor. Just like an electrical circuit breaker prevents a system from being overloaded with too much current, a property tax circuit breaker prevents a household’s budget from being overloaded by taxes.

These programs work by providing a refund or a tax credit when a senior’s property tax bill exceeds a certain percentage of their annual income. A tax credit is a dollar-for-dollar reduction of the taxes you owe. The core idea behind a circuit breaker is that your property tax burden should be proportional to your ability to pay. When the burden becomes too high relative to your income, the program “trips” and provides relief.

Here is a simple example. Let’s say a state has a circuit breaker program that triggers when property taxes are more than 4 percent of a senior’s household income. Your annual income from Social Security and a small pension is $35,000. The threshold for you would be $1,400 (which is 4 percent of $35,000). If your actual property tax bill for the year is $2,200, it is well above your threshold. The program would then provide you with a credit or rebate for the amount you paid over the limit. In this case, you would receive $800 back ($2,200 minus $1,400).

These programs are an extremely effective way to target relief to the low- and moderate-income seniors who need it most. They are a direct answer to the question of how can seniors lower their property taxes in a way that is tied to their actual financial situation. Eligibility is always based on income, and you must file an application to receive the benefit, often as part of your state income tax return, even if you do not normally file one.