Property Tax—General.
All real and personal property in the state is subject to property tax each year based on its value, unless specific exemption is provided by law. The Washington Constitution limits regular property tax levies to a maximum of 1 percent of the property's value ($10 per $1,000 of assessed value). Excess levies are not subject to this constitutional limit and require voter approval. There are statutory rate maximums for individual taxing districts and aggregate rate maximums to keep the total tax rate of regular property taxes within the constitutional limit. All regular levies, except the state levies, are subject to a statutory revenue growth limit. If the taxing authority has a population of 10,000 or more, the revenue growth limit is the lesser of inflation or 1 percent plus the valuation of new construction. If the taxing authority has a population of less than 10,000, the revenue growth limit is 1 percent plus the value of new construction.
Property Tax—Senior Citizens, Disabled Veterans, and Limited Income Households Tax Relief.
Qualifying senior citizens, persons retired due to disability, and veterans are entitled to property tax relief on their principal residence. To qualify, a person must be:
The amount of the reduction in property taxes owed is based on the applicant's income and county of residence.
Valuation Freeze.
In addition to the partial exemptions listed above, the valuation of the residence of an eligible individual is frozen, for the purpose of calculating property tax liability, at the assessed value of the residence on the later of January 1, 1995, or January 1 of the assessment year in which the person first qualifies for the program. Qualification for the valuation freeze is based on the applicant's income and county of residence.
Deferral.
Individuals who are at least 60 years of age in the year of application or are retired by reason of disability are permitted to defer their property taxes. Taxes that are deferred become a lien against the property and accrue interest at 5 percent per year. If deferred taxes are not repaid within three years after the eligible person ceases to own and live in the residence, the lien will be foreclosed and the residence sold to recover taxes.
Widow and Widower of Veterans Tax Relief.
Qualifying widows or widowers of veterans can receive a grant of state funds to pay a portion of their property taxes. Qualified applicants must be a widow or a widower of a veteran who either:
Applicants for the property tax assistance program must: be over the age of 62 or unable to work because of disability; have a disposable income of $40,000 or less; own and occupy a primary residence in Washington; and have not been remarried. Repayment of the grant is not required if the applicant continues to live in the residence until at least December 15 in the year a grant is received.
Limited Income Property Tax Deferral Program.
Individuals with an annual household income of $57,000 or less may defer 50 percent of yearly real property taxes and special assessments. Deferred amounts, including interest, become a lien on the residence. A claimant may not make a claim for deferral under both this program and the senior citizens limited income deferral program in the same tax year.
Combined Disposable Income.
For property tax relief programs, combined disposable income is defined as the sum of federally defined adjusted gross income and the following, if not already included: capital gains; deductions for losses; depreciation; pensions and annuities; military pay and benefits; veterans benefits except attendant-care and medical-aid payments; Social Security and federal railroad retirement benefits; dividends; and interest income on state and municipal bonds.
Payments for the care of either spouse received in the home, in a boarding home, in an adult family home, or in a nursing home; prescription drugs; and Medicare health care insurance premiums are deducted when determining combined disposable income.
For the purposes of the senior citizen and disabled veterans property tax exemption, the widow and widower of veterans property tax relief program, and the limited income property tax deferral program, expenses that are deducted when determining combined disposable income are expanded to include:
The substitute bill clarifies that the changes made to the exemption program are not subject to Joint Legislative Audit and Review Committee review and do not expire after 10 years, but are instead permanent.
(In support) The Legislature increased the income threshold for this exemption program in 2019, and during that discussion the assessors pointed out that sometimes the impact does not effectively get to the right people. Seniors who qualify for the exemption who encounter substantial additional medical expenses need more support. This bill allows more deductions for those who have medical costs. Seniors often lose eligibility for the program because they draw out taxable income in order to pay for medical expenses, which causes direct financial difficulty. This bill would effectively increase income threshold levels by several thousand dollars and help level the playing field.
(Opposed) None.
No new changes were recommended.
(In support) This bill is based on an idea by county assessors. When the Legislature has previously amended property tax exemption programs to increase eligibility, it has typically done so by increasing the income threshold across the board. Assessors have previously had concerns about this approach and whether it is targeting assistance to those who need it. This bill would provide a more targeted approach by assisting individuals who have incomes above the current threshold but incur significant medical expenses. This bill would level the playing field and provide relief specific to those who have excess expenses.
(Opposed) None.