Property taxes in New Jersey have always been a hot topic of conversation. This was exacerbated with the changes to the federal income tax law passed in December 2017.
Did you know that the State of New Jersey offers to freeze the property taxes of senior citizens and disabled homeowners, as well as the site fees for mobile home owners? Hundreds of thousands of seniors and disabled homeowners in the state benefit from the Senior Freeze.
If you are not already benefiting from the Senior Freeze, this concept may be new to you and you should understand its key attributes.
What is a property tax freeze?
A property tax freeze prohibits increases to property taxes for eligible individuals. However, New Jersey has a slight variation of this definition. The New Jersey property tax freeze program is titled The Senior Freeze (Property Tax Reimbursement) Program and reimburses eligible New Jersey residents for property taxes or mobile park site fees on one’s principal residence.
The program does not actually freeze the property tax, but it sets a base-year property tax value and then requires eligible individuals to file for a reimbursement of any amounts over that base-year value. The base-year value is defined as the property tax in the first year you meet eligibility requirements for the freeze. The amount of the reimbursement is calculated as the property tax paid in the current year less the property tax paid in the base-year. The reimbursement check acts to effectively freeze the property tax bills.
Who is Eligible?
As noted above, the Senior Freeze is available to eligible New Jersey residents. Eligibility must be met each year, even if you qualified the prior year. The State defined eligibility as meeting all the following requirements:
(1) One of the spouses who owns the home is age 65 or older or is receiving Federal Social Security Disability benefits;
(2) One of the owners has resided in New Jersey as a renter or homeowner for the last 10 years (continuous) and has lived in the current home for the last three years;
(3) The full amount of the property taxes or mobile home site fees have been paid in the past;
(4) The home must be a primary residence to qualify, which does not include a vacation home, rental property or a home with more than four units; and
(5) The owners must meet the income limits, as described below.
The income eligibility is the most cumbersome criteria to meet. The annual income limit to qualify for the Senior Freeze is $87,268 in 2018, which applies to either a single person or married couple. However, tax law changes in 2016 decreased the income limitation to $70,000 to actually receive payment of the reimbursement. If your income level is between $70,000 and $87,268, you will qualify for the freeze, thus setting the base-year amounts, but you will not receive a reimbursement check until your income falls below $70,000.
Income for eligibility includes salary income (W-2, 1099), interest and dividends, business earnings, retirement income, social security benefits, disability benefits and tax-exempt interest. Some of the more common exclusions from income are the Senior Freeze benefits, Homestead benefits, spousal life insurance, proceeds from a Special Needs Trust, and the capital gains on the sale of a home up to the exclusion of $250,000 / $500,000.
How to Apply
A first-time filer or an individual who filed an application in the previous year that was denied because the applicant did not meet all the eligibility requirements must file a completed Application PTR-1 and Homeowner’s Verification of 2016 and 2017 Property Taxesform before October 31, 2018. These forms can be found on the State of New Jersey Department of the Treasury website.
If you previously filed the PTR-1 Form and met the eligibility requirements, you must complete a Form PTR-2. The PTR-2 Form is a personalized application that is mailed to you from the state if you filed an application and met all the eligibility requirements for reimbursement the previous year. If you have not received your personalized application, you are asked to call the Property Tax Reimbursement Hotline at 1-800-882-6597.
The Senior Freeze rules, including eligibility, are subject to change based on the annual State budget. One specific concept that has been discussed is changing the program from a reimbursement program to a tax credit program, providing credits against future property tax bills. This is seen as a move to reduce administrative costs for the State, as well as assist seniors on a fixed income by reducing the amount paid for taxes out of their pockets and reducing the time spent waiting for a refund.
We will continue to monitor the situation throughout the year. If you think you meet the eligibility requirements, we recommend that you complete the application process.