With some of the highest property values in the country, some older Massachusetts homeowners possess sizable wealth. But those high values carry high taxes, and many seniors on fixed incomes find themselves in a state that one local assessor called “house rich and cash poor.”
That contrast was a central theme before the Revenue Committee of the Massachusetts Legislature on Tuesday, where supporters of legislation to update senior tax relief programs pushed for measures that would increase the value of local exemptions or make more residents above the age of 65 eligible to defer property taxes.
“This is one of the common concerns people raise, setting aside the pandemic issues that are attendant to all of us,” Mike Festa, state director for AARP Massachusetts, told the committee. “When the dust settles and we try to get back to some sense of normal, this is the kind of problem that is systemic, long-standing, and exacerbated over time.”
Older Bay Staters can seek property tax relief in several ways, including via the state-administered circuit breaker tax credit, local exemptions, and deferral of the taxes owed at the local level.
The deferral option allows residents 65 or older with low annual incomes to push back a portion or all of the property taxes they owe. According to a Massachusetts Department of Revenue taxpayer guide, the taxes plus interest cannot exceed more than 50 percent of the homeowner’s “proportional ownership share of the fair cash value of the property.”
Of the state’s 351 cities and towns, 119 granted at least one property tax deferral for residents 65 and older in fiscal year 2021 (which ended June 30, 2021), according to state Department of Revenue data.
Newton issued more deferrals than any other community with 69, representing $589,014 in property taxes whose collection will be delayed. In terms of total value, Needham topped the list with 12 deferrals constituting $998,283 in taxes.
Program backers say postponing payments allows seniors on fixed and limited incomes to focus on their more pressing needs, such as food and medicine, and pay off a tax bill further down the road.
However, some lawmakers and advocates contend that the deferral local option still imposes several unnecessary barriers, including a requirement that a senior live in Massachusetts for 10 years and own a property for five years to qualify.
“If you’re my neighbor, you’re my neighbor the day you move in, not after five years or 10 years,” state Representative Tommy Vitolo (D-Brookline), who filed legislation with state Representative David Rogers (D-Norwood) (H 3090) striking that time-based eligibility standard, told his colleagues.
Their bill would also amend the 8 percent default interest rate on the deferred property tax value to a lower figure based on recent state or local bond rates, which Vitolo estimated is about 3 percent.
Another obstacle the deferral program poses, Vitolo said, is a sharp and sudden increase in the interest rate when a recipient dies.
Current law doubles the rate from 8 percent to 16 percent “on the day of that senior citizen’s passing,” Vitolo, a Brookline Democrat, said. His bill would delay that increase by one year to give surviving family members or an estate time to respond.
In an interview after the hearing, Festa said the existing interest rate increase creates a “very onerous result from the accident of timing.”
“The person who inherits the property, let’s say the children, may not even know there’s a tax deferral,” Festa said. “They would be in a situation where they’re taking up a huge increase in the bill because the interest rate attaches, so giving breathing room for the family and the estate to settle and sell and then pay — you’re just acknowledging that you don’t want this kind of onerous result, which is not fair.”
AARP Massachusetts endorsed the legislation Vitolo and Rogers filed. Festa said he believes the Revenue Committee could “probably cobble together a good omnibus bill” incorporating some other proposals dealing with tax relief for seniors, adding that “on balance, the Vitolo-Rogers bill is the one that addresses the most critical need out there.”
Another bill on the committee’s plate (H 3732 / S 1916) would give municipalities greater leeway to increase eligibility for property tax exemption programs without first getting approval from the state.
Victor Santaniello, town assessor for Wakefield and Reading, told the Revenue Committee that income and asset limits for the tax exemptions “have not kept pace with our economy.”
In communities that have not pursued cost-of-living adjustments, the maximum eligible income to qualify for a senior property tax exemption is $20,000 for a single person and $30,000 for a married couple, Santaniello said. Even in Wakefield, which has implemented cost-of-living adjustments to the income limits for 17 years, the caps are $28,000 and $40,000 respectively, according to Santaniello.
The bill would set new eligibility limits for property tax exemptions based on the statewide senior citizen circuit breaker tax credit, which Santaniello said has a “much higher income threshold,” and allow local assessors to set the exemption amount without first securing a home rule petition.
“This solves the problem of someone being house rich and cash poor,” Santaniello told State House News Service.
State law sets the property tax exemption for seniors at $500, and about 100 communities have taken local action to increase it to $1,000, Santaniello said. Both he and the bill’s House author, state Representative Kate Lipper-Garabedian (D-Melrose), warned that the process for doing so is arduous and requires state legislative action to clear the way for municipal leaders.
When Wakefield moved to increase its exemption amount last session, it took 17 months to move from the filing of a home rule petition to securing Governor Charlie Baker’s signature, Lipper-Garabedian said.
“It’s of high importance that local governments are granted expanded authority by the state. The alternative is a lengthy and multi-stage process that delays implementation of property relief programs and thus disadvantages senior citizens,” she said.
Lipper-Garabedian, who filed the bill alongside state Senator Jason Lewis, said the Revenue Committee favorably reported an earlier version of the legislation last session.
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