Real estate attorney blog concerning purchase agreements, tax evaluations, and other cleveland ohio lawyer concerns.

Ohio Homestead Exemption

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Homes, for most people, are the most significant and expensive asset they possess. Being a homeowner is expensive, property taxes, homeowner’s insurance, utilities, repairs and upkeep, just to name a few.  As such, homeowners are concerned with exploiting every available opportunity or tactic to save money regarding their houses. One such opportunity is the Ohio homestead exemption, which, if exploited properly, can save thousands of dollars for homeowners over the years. If you want to take advantage of this credit, or don’t know how to apply for it, contract a local Cleveland area estate planning attorney and start saving.  

  • What is the Ohio Homestead Exemption?  

Per the Ohio Department of Taxation, the homestead exemption allows low-income senior citizens and permanently and the totally disabled, to reduce their property tax bills by shielding some of the value of their homes from taxation. The exemption works by giving qualified recipients a credit on property tax. This credit allows homeowners to exempt $25,000 in home value from all local property taxes. For example, if a home is worth $90,000 and qualifies for the exemption, it will be taxed as only being worth $65,000.    

Like all legal and tax questions, the precise amount of available savings is highly dependent on personal circumstance and state and local tax code. Further, under Ohio law, and as the name suggests, this exemption is limited to the “homestead,” which is defined as an owner’s dwelling and up to one acre of land. As such, if you have more property, different tax saving strategies, such as trusts, must be pursued. Again, per the Ohio Department of Taxation, overall, across Ohio, qualified homeowners saved an average of about $495 per taxpayer during the 2015 tax year. Note, however, the value of the exemption may not exceed the value of the homestead.  

  • How do you qualify for the Homestead Exemption? 

Per the Ohio Department of Taxation, the homestead exemption is available to any Ohio resident homeowner who:  

  • Owns and occupies their own home as their primary residence and 
  • Qualifies under the means-test and 
  • Is at least 65 years old or turns 65 in the year for which they apply; or 
  • Is totally and permanently disabled as of January 1 of the year for which they apply, as certified by a licensed physician or psychologist, or a state or federal agency; or  
  • Is the surviving spouse of a person who was receiving the previous homestead exemption at the time of death, and where the surviving spouse was at least 59 years old on the date of death. 

What is the mean-test for the Ohio homestead exemption? The means-test is an income threshold, which an applicant must be under to claim the exemption ($32,200 in 2018).  Further, since applications for real property are filed in the year for which homestead is sought, the homeowner must be 65 by December 31 of the year the application is filed. Additionally, in the event a person owns more than one home, the principal place of residence is the home where the person is registered to vote, and the person’s place of residence for income tax purposes. 

  • Homestead Exemption and Trusts 

As trusts have become more and more popular in estate planning, a common question is, will I lose my homestead exemption if I place it in trust? Again, like most legal questions, the answer is it depends. Here, it depends in the exact terms of your trust and the nature of the ownership interest conveyed to the trust and retained by the grantor/homeowner. 

As stated above, a critical aspect of qualifying for the homestead exemption is that it is only available for your personal residence and you are occupying. Herein lies the rub and is where your Cleveland estate planning attorney earns his keep. First, the legal definition of “owner” is broad enough to include a vendee in possession under a purchase agreement or a land contract, a mortgagor, a life tenant, and a settlor of a revocable or irrevocable inter vivos trust holding the title to a homestead occupied by the settlor as of right under the trust.  So, it doesn’t necessarily have to be the record title holder that qualifies for the exemption. Second, whether something is both a personal residence and in a state of occupation are fact specific questions. Largely you prove both via paperwork. The address you put down for your driver’s license, tax returns, receive mail, register to vote, etc.  Third, through precise and smart drafting of trust language, on paper your home can receive the peace of mind and protections of being in trust, while in reality, and to qualify for the exemption, you still physically reside at the home.  

The use of either a revocable or irrevocable trust is not an automatic foreclosure of homestead exemption eligibility. If a homeowner is willing to play ball and, if circumstances require, make some estate planning concessions to take tactical advantage of certain options, the world is your oyster. Municipal, state, and federal tax codes are full of potential avenues for estate tax savings, one only needs the courage and knowledge to take advantage of them. Lucky for you, smart homeowner, you have experienced Ohio estate planning attorneys that are only a quick phone call away.    

Disclaimer: 

The information contained herein is general in nature, is provided for informational and educational purposes only, and should not be construed as legal or tax advice. The author nor Baron Law LLC cannot and does not guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws that may be applicable in a given situation may impact the applicability, accuracy, or completeness of the preceding information. Further, federal and state laws and regulations are complex and subject to change. Changes in such laws often have material impact on estate planning and tax forecasts. As such, the author and Baron Law LLC make no warranties regarding the herein information or any results arising from its use. Furthermore, the author and Baron Law LLC disclaim any liability arising out of your use of, or any financial position taken in reliance on, such information. As always consult an attorney regarding your specific legal or tax situation.  

How to Lower Your Property Tax – Fighting Overvalued County Appraisals

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What: Property Value Appraisal

Ohio operates on a system in which county auditors reappraise every piece of land and every building located in their county every six years. These base appraised values are then multiplied by local tax rates. This value is what is shown on local county auditor’s website and is often used as a base line when determining potential real estate taxes.

This reappraisal occurs in different counties at different times. Naturally, it is just too much for every local government to reappraise everything all at once. So, Ohio uses staggered reappraisal with different groups of counties undergoing reappraisal or updating during different tax years.

The following counties recently have either finished reappraisals or recently undergone updates:

Update Counties

 

Allen Coshocton
Guernsey Sandusky
Vinton  

 

Reappraisal Counties

 

Belmont Brown Crawford Cuyahoga Erie
Fayette Highland Huron Jefferson Lake
Lorain Lucas Morgan Muskingum Ottawa
Portage Stark Warren Williams  

 

Why: Property Reappraisal and Updating can result in a Bigger Tax Hit

Most importantly with reappraisal and updating, is that they can result in increased property values and consequently increased tax liability. Property owners in particular counties subject to reappraisal or update will see new property values reflected in their property tax bills that arrive in the mail either December or January.  This is an often-overlooked tax consequence that many people fail to plan for and can eat up an otherwise expected, and critical, tax refund. As such, many people desire to keep their property values low, at least in regards to taxation, and want to challenge their county auditor’s assessment of their property value. This is where experienced Cleveland legal attorneys come in.

How: Filing a Complaint to Challenge Property Valuation

The period for filing formal challenges to a county auditor appraisal generally begins January 1 and ends March 31 so contact an attorney sooner rather than later if you want to challenge a recent change in your property value. Generally, property owners can only challenge an assessment one time every three years.

How you challenge an improper auditor valuation is with a complaint filed with your local county board of revision where the property under dispute is located. This complaint is sometimes referred to as a “complaint against valuation” and asks 14 boilerplate questions. Questions such as has the property been sold within the last 3 years, have you made any improvements to the property, and your justifications for requesting a change in value.

This form is found on every county auditor’s website as well as the Ohio Department of Taxation’s website. A lot of individuals challenge land valuation so the process, at least in some ways, is streamlined. Note, however, if the property owner challenging valuation is a business, an attorney must almost always sign the complaint.

The most common reasons property values are challenged include declining market values in a depressed area, functionally and/or economically obsolete properties, declining rents in tandem with vacancies, and damage caused by non-human agency, such as fire, flood, earthquakes, or mold. Further, those who recently purchased a property in an arms-length transaction for less than the county auditor’s value, often have a strong case. Note, however, recent Ohio Supreme Court rulings adjusted the evidentiary rules for property owners looking to use a recent arms-length transaction as a basis to challenge the value of real property. The important takeaway from recent legal rulings is that appraisal evidence must be carefully considered before presentment to the board of revision. As such, experienced legal counsel should be retained before filing any tax appeal.

Once the complaint is filed and received by the board of revision, the board sets an evidentiary hearing. The hearing usually lasts between 15 to 30 minutes and takes place in front of a panel of decisions makers, usually the county auditor, county treasurer, and the president of the Board of County Commissioners. At this hearing, an attorney appears on your behalf and presents arguments, evidence, and witness testimony to prove the actual property value. Depending on the value or discrepancy of the value under dispute, other interested parties, such as local school districts, will appear via their own counsel and argue in favor of the higher value.

After the hearing, the board of revision makes its decision of the value of the real property. If you took the proper steps, gathered the right documents, and hired the right attorney, your property value should be changed to reflect the real value and you can avoid any significant tax hit in the near future.

When: When should I challenge?

As with every legal question asked of every attorney, the answer is always going to be, it depends. But as rule of thumb, if it seems like no rational buyer would purchase your property for what the auditor appraised it, calling your local Cleveland business attorney is probably a good move.

Another critical factor in assessing when to challenge is the sufficiency of evidence currently in your possession. This is where good legal counsel comes in. Attorneys are well-versed in hiring qualified appraisers to determine the initial overvaluing of the property, generating presentable reports for the evidentiary hearing, and identifying the relevant purchase transaction documents. If you are asking for a significant change in value, it is highly likely opposing attorneys will come out of the woodwork to counter your appeal. As such, experienced local counsel is often the difference between a waste of time and money and significant tax saving.

Disclaimer:

The information contained herein is general in nature, is provided for informational and educational purposes only, and should not be construed as legal or tax advice. The author nor Baron Law LLC cannot and does not guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws that may be applicable in a given situation may impact the applicability, accuracy, or completeness of the preceding information. Further, federal and state laws and regulations are complex and subject to change. Changes in such laws often have material impact on estate planning and tax forecasts. As such, the author and Baron Law LLC make no warranties regarding the herein information or any results arising from its use. Furthermore, the author and Baron Law LLC disclaim any liability arising out of your use of, or any financial position taken in reliance on, such information. As always consult an attorney regarding your specific legal or tax situation.

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