Maine’s new property tax deferral program for seniors launched on Jan. 5. The program is designed to help those over 65 or with permanent disabilities stay in their homes by providing lifetime loans to cover the cost of municipal property taxes. The loans can be deferred for the life of the homeowner, and repaid from the homeowner’s estate.
The program is the result of legislation signed into law by Gov. Janet Mills on July 19, 2021. The chief sponsor of the bill was Sen. Donna Bailey, D-Saco. The bill was modeled on a similar program from 1989 that was suspended during the 1991 recession.
In a news release from her office, Gov. Mills said, “older Mainers and those with disabilities deserve to live and age in the comfort of their homes without worrying they’ll lose them because they can’t afford the property taxes.”
Property taxes can be one of the largest annual bills faced by residents in Maine. The most recent comparison available from Maine Revenue Services using figures from the 2019 Municipal Commitment and the 2021 State Valuation places Lincoln County’s average equalized tax rate at 10.36, or $1,036 per $100,000 of valuation.
Based on that rate, a home in Lincoln County valued at $200,000 would owe an average of $2,072 in property taxes.
Property taxes are set by towns based on their individual funding requirements, and fluctuate yearly. In 2021, tax rates ranged from 4.025 in South Bristol to 20.1 in Somerville.
Many Lincoln County seniors on fixed incomes still live in inherited family homes with properties that may be valued significantly higher. Some face property tax bills of $5,000 or more annually.
According to the Old-Age, Survivors, and Disability Insurance program of the Social Security Administration, in December 2020 there were 9,375 Social Security recipients over the age of 65 in Lincoln County, receiving an average of $1,483.
Given an extrapolated annual income of $17,796, property taxes could easily account for more than one fourth of some retirees’ annual income.
One major benefit of the State Property Tax Deferral Program is that it does not adversely affect taxes to local municipalities. Much-needed taxes that help fund schools, roads, and infrastructure are still paid in full on schedule.
But the program could preserve significant funds for a lower-income senior – potentially improving their chances of aging in place, a common goal for many of Maine’s older residents.
In the news release, Kirsten Figueroa, commissioner of the Department of Administrative and Financial Services said, the program “(allows) folks to remain at home without hamstringing local budgets.”
Eligibility for the program is limited to owner-occupied, primary residences with owners aged 65 or older and/or permanently disabled, earning less than $40,000 per year, with liquid assets below $50,000 (or below $75,000 if applying jointly). In addition, there can’t be any limitations on the homeowner’s ability to sell the property or take out loans, and there must be a homestead exemption in place.
Homestead exemptions are reductions of up to $25,000 in the value of a home for property tax purposes. They can be applied for through the municipality where a home is located. The homestead exemption can pertain to any residential land or building, including mobile homes, that have been the homeowner’s permanent residence for at least 12 months.
According to the details of the State Property Tax Deferral Program, property eligible for deferral includes both the principal residence and up to 10 contiguous acres. If the property is located in a multi-unit building, the eligible property is the portion of the building used as the principal dwelling plus a percentage of the common areas and the land on which the building is located.
Eligible homeowners can apply for the deferral through April 1 by submitting applications to the municipality where they live. The municipality will work directly with Maine Revenue Services to process applications and payments. Once approved, the resident does not need to reapply. The deferral can remain in place as long as there are no disqualifying changes in circumstances.
Maine Revenue Services will place a lien on the homestead as security for the taxes paid plus interest. According to Kelsey Goldsmith, director of communications for the Department of Administrative & Financial Services, the interest rate for the State Property Tax Deferral Program is statutorily benchmarked at 1% lower than the Maine Revenue Services’ standard interest rate.
That rate is 5% for 2022, making the interest rate for the property tax program 4% for the current year. In comparison, the APR for a home equity line of credit from the Maine State Credit Union was listed “as low as 3.25%,” but the rate is variable, and conditions apply.
In an email Goldsmith said, “The State Property Tax Deferral Program is meant as a lifeline for those who are older or disabled with no other option for paying their property taxes, and who would otherwise be on the verge of losing their homes. Due to the program’s strict income and liquid asset thresholds, as well as the likelihood that participants may already be falling behind, those eligible for the program may not qualify for standard lending products available from the private sector.”
Participating homeowners will receive an annual notice with the current balance, and deferred taxes plus interest must be repaid when participation in the program is ended, whether they are paid by the homeowner or by the homeowner’s estate.
Situations that trigger the repayment of the loan include the death of the homeowner, the sale of the home, a change in the homeowner’s principal residence (unless for health reasons), the removal of the property from the program, and, in the case of a mobile or floating home, the removal of the property from the State of Maine.
Lincoln County Commissioner Bill Blodgett said he doesn’t think many of the people who could benefit from the program are aware of it. He said he would like to see towns play a role in informing residents who may be eligible.
“It’s an opportunity for people who have very limited assets to continue living in their home,” he said.
The program is funded by an allocation of $3.5 million from the American Rescue Plan Act through the Gov. Janet Mills administration’s Maine Jobs & Recovery Plan. Repayment of the loans when the property is sold or becomes part of an estate will be used to sustain the program indefinitely.
Applications may be obtained at maine.gov.