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Thursday, January 22, 2015

Senior Property Tax Exemption Explained

[Published Jan. 22, 2015, in the Jeffco editions of the Denver Post's YourHub section. An abbreviated version also appeared in four Jefferson County weekly newspapers.]

I learned something new recently about the proration of property taxes when the seller of a home is a qualified senior benefiting from the senior property tax exemption.

Here’s a scenario I experienced recently:

My seller was qualified for the senior property tax exemption because he was over 65 on January 1st of 2014 and had lived in the home he was selling for the previous 10 years — and he had applied for the tax exemption with the county assessor. (It’s not automatic; you have to fill out an application.)

Here it was, late 2014, and he was selling his home to a young couple.  (It wouldn’t have mattered if the couple were over 65, because they won’t qualify for the tax exemption until they have lived in the house for 10 years.)  Come April, this young couple will have to pay the 2014 property taxes, but how should the 2014 property taxes be prorated?

The title company and we real estate agents were under the impression that come April, when property taxes are due, the new owner would not benefit from the senior property tax exemption — but my seller did his research and proved us wrong, saving himself several hundred dollars in proration.

It turns out that the law says that if the person who owned the home on January 1st was a qualified senior, then whoever owns the property later that year still gets to enjoy the senior property tax exemption for the whole year. 

A problem arises when a home sells early in the year, such as January, because the Legislature sets the amount of the tax exemption each year based on budgetary constraints. Therefore, the parties can’t know at a January closing whether the property tax which the buyer will owe in April 2016 will be the same, lower or higher than the property taxes that will be owed for 2014, until the Legislature sets the exemption amount later this year.


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