Rising property taxes and insurance bills have you worried you could lose your home? If money is tight for your family, you owe it to yourself to check out homestead tax deferral when your tax bill arrives next month.
While it's not for everyone, property tax deferral can be a great option for lower income people who have a lot of equity in their homes, especially the elderly. And changes in the rules mean that this year deferral is available to more Florida homeowners than ever.
It's a shame hardly anybody takes advantage of it.
Think of tax deferral as a mini reverse mortgage: You get extra cash - the money you would have spent on property taxes - that you don't have to pay back as long as you own your home and maintain homestead status.
"I don't know how I would make ends meet without it," said Carole Bustle, 58, of Odessa. For the past seven years, she has deferred most of her more than $2,000 annual tax bill.
"I'm house wealthy, but I'm poor," said Bustle, who is disabled. "For people on a fixed income like me, it's excellent."
Yet hardly anybody uses it. Last year, Bustle was one of four Pasco County homeowners - out of 215,565 properties on the tax rolls - to take advantage of deferral. The situation is similar in other counties. In Pinellas, 31 out of 428,000 properties are deferring taxes.
"People know about it," Pasco Tax Collector Mike Olson said. "State law requires that it be put on the back of the envelope that you receive your tax notice in."
He said tough qualifying criteria may discourage some people, particularly the requirement to maintain homeowner's insurance so your tax debt will be paid if your house burns down.
"The property insurance could well exceed the amount of the tax," Olson said.
To find out if you might qualify for tax deferral, check the "adjusted gross income" line on last year's tax return. Social Security income is counted only if it is taxable. Income for everyone in your household is considered.
You can defer your entire property tax bill if you are 65 or older and your household's adjusted gross income is less than $23,463. That's about double the income limit last year. If you are younger, full deferral is available if your income is less than $10,000.
To find out if you qualify for partial deferral, multiply your household's adjusted gross income by 0.03 if you are 65 or older or 0.05 if you are younger. If your property tax bill is larger than this number, you may be eligible. For example, a 65-year-old with a $30,000 income and a $2,000 tax bill might be eligible to defer $1,100. A younger person with the same income might get a $500 deferral.
There are other rules too. Only homestead property qualifies, and your mortgage cannot exceed 70 percent of your home's assessed value. The mortgage, deferred taxes and other liens cannot exceed 85 percent of the home's value.
The chief drawback for many homeowners is that deferral is just that - deferral. The tax eventually has to be paid and the debt accrues interest in the meantime. The rate, 5.6 percent, is adjusted annually, but cannot exceed 7 percent.
Harold Burdick, 80, of Inverness deferred more than $400 in taxes last year, but said he and wife, June, have decided to pay their taxes this year.
"We don't want to leave that as an extra burden for the kids when they settle up," said Burdick, a retired minister. "Our taxes are not a lot of money, and there's no reason we can't pay them."
Tax collectors in every Florida county take applications for tax deferral between Nov. 1 and Jan. 31 each tax season.
Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, write email@example.com or Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731. Read more questions and answers at blogs.tampabay.com/money.