Property Tax Circuit Breaker Programs

18 states offer this type of relief as of 2018

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Low-income homeowners pay a larger percentage of their incomes in property taxes than high-income taxpayers do because these taxes are based on the value of a home, not on income. They're disconnected from an owner's ability to pay. A type of targeted tax break for this problem is referred to as a "circuit breaker" program.

Property Taxes vs. Income Taxes

A taxpayer who loses their job will find that their income taxes go down because they're earning less. But their property taxes will remain the same, even though their ability to pay those taxes has decreased. Residential taxes are said to be "regressive" for this reason.

The Institute on Taxation and Economic Policy (ITEP) assessed the fairness of state and local property tax systems and found that they're fundamentally inequitable, taking a much greater percentage of income from low- and middle-income families. ITEP found that state and local taxes are the inverse of income.

Homestead Exemptions

Elected officials in each state have two broad-based options when they attempt to enact property tax relief for low- and middle-income families. They can implement an across-the-board tax cut for taxpayers of all income levels. A homestead exemption is an example of this approach. It usually exempts a flat dollar amount or flat percentage of home value from the tax.

The other option is the property tax circuit breaker.

Property Tax Circuit Breakers

A tax circuit breaker can be broadly defined as any property tax relief that limits or reduces taxes for certain individuals. Circuit breaker programs are often specifically enacted for low-income, elderly, or disabled owners.

The term derives its name from an electrical circuit breaker that shuts off the current when a system is overloaded. Similarly, circuit breaker programs kick in when too much of a taxpayer's income must go to property taxes. The circuit breaker reduces or eliminates the overload.

Types of Circuit Breaker Programs

States use a variety of circuit breaker methodology. The most common are threshold circuit breakers, the only ones recognized by the Center on Budget and Policy Priorities (CBPP). They include:

  • Threshold circuit breakers: Based on a percentage of income that property taxes must exceed
  • Single threshold circuit breakers: Applies the same percentage-of-income threshold to all taxpayers
  • Multiple threshold circuit breakers: Applies different percentages to different spans of income

States With Circuit Breaker Tax Relief

Eighteen states and the District of Columbia have adopted this form of tax relief as of 2018, but a good portion of them offer assistance only to the elderly and/or the disabled. This is based on the theory that these individuals tend to earn less.

Circuit break income eligibility limits range from a high of $147,000 in Vermont to a negligible $5,500 in Arizona.

An additional 13 states offer other forms of property tax relief based on income, age, and disability. The following homeowners qualify in each state offering for at least one of these types of tax relief:

  • Arizona: An income-based program for homeowners age 65 and older and those receiving Supplemental Security Income (SSI); no circuit breaker relief
  • Colorado: An income-based program for homeowners age 65 and older, surviving spouses age 58 and older, and the disabled; no circuit breaker relief
  • Connecticut: An income-based program for homeowners age 65 and older, surviving spouses age 58 and older, and the disabled; no circuit breaker relief
  • District of Columbia: Circuit breaker tax relief with no age requirements; offers a separate program for the elderly and the disabled
  • Hawaii: An income-based program with no age requirements; no circuit breaker relief
  • Iowa: An income-based program for homeowners age 65 and older and the disabled; no circuit breaker relief
  • Idaho: An income-based program for homeowners age 65 and older, surviving spouses, the disabled, former prisoners of war, disabled veterans, and orphaned minors; no circuit breaker relief
  • Kansas: An income-based program for homeowners age 55 and older, the disabled, and guardians of dependent children under age 18; no circuit breaker relief
  • Massachusetts: Circuit breaker tax relief for homeowners age 65 and older
  • Maine: Circuit breaker tax relief with no age requirements; offers a separate program for the elderly
  • Maryland: Circuit breaker tax relief with no age requirements
  • Michigan: Circuit breaker tax relief with no age requirements; offers a separate program for the elderly
  • Minnesota: Circuit breaker tax relief with no age requirements
  • Montana: Circuit breaker tax relief with no age requirements
  • Missouri: Circuit breaker tax relief for homeowners age 65 and older and the disabled
  • New Hampshire: An income-based program for all ages; no circuit breaker relief
  • New Mexico: Circuit breaker tax relief for homeowners age 65 and older
  • New York: An income-based program for all ages; no circuit breaker relief
  • North Dakota: Circuit breaker tax relief for renters age 65 and older and the disabled
  • Oklahoma: Circuit breaker tax relief for homeowners age 65 and older and the disabled
  • Oregon: Circuit breaker tax relief for homeowners age 58 and older
  • Pennsylvania: An income-based program for homeowners age 65 and older, surviving spouses age 50 and older, and the disabled; no circuit breaker relief
  • Rhode Island: Circuit breaker tax relief for homeowners age 65 and older and the disabled
  • South Dakota: An income-based program for homeowners age 65 and older and the disabled; no circuit breaker relief
  • Utah: Circuit breaker tax relief for homeowners age 65 and older
  • Vermont: Circuit breaker tax relief with no age requirements
  • Wisconsin: Circuit breaker tax relief with no age requirements
  • West Virginia: Circuit breaker tax relief with no age requirements
  • Wyoming: An income-based program with no age restrictions; offers a separate program for the elderly but no circuit breaker relief

The exact systems in place vary from state to state.

The Advantages of Circuit Breakers

Circuit breaker programs are designed to reduce the tax burden of only low- and middle-income families, so they're much less expensive for the state than across-the-board tax cuts.

Additionally, they introduce the "ability to pay" criteria because they respond to income level. They reduce property taxes for these groups to a manageable level and prevent an inability to pay from forcing these people out of their homes.

The Disadvantages of Circuit Breakers

The biggest disadvantage of these programs is that you have to know about them to get the tax relief they offer. A circuit breaker is generally only granted to taxpayers who apply, unlike homestead exemptions which are often automatic, across-the-board tax cuts.

Contact your local taxing authority if you're struggling to keep up with your property tax burden on your income. This is your best and often your only option to find out what's available in your location.

Some states get rather creative with their property tax breaks, so you might find that other help is available even if yours doesn't offer a circuit breaker program—but you have to ask.

Tax laws change periodically and the above information might not reflect the most recent changes. Please consult with a tax professional for the most up-to-date advice in your location. The information contained in this article is not intended as tax advice and it is not a substitute for tax advice.

Article Sources

  1. Institute on Taxation and Economic Policy. "Who Pays? 6th Edition." Accessed Feb. 9, 2020.

  2. Lincoln Institute of Land Policy. "Property Tax Circuit Breakers." Pages 14-16. Accessed Feb. 9, 2020.

  3. Institute on Taxation and Economic Policy. "Property Tax Circuit Breakers in 2018." Accessed Feb. 9, 2020.