Senior Property Tax Decrease (Austin, Center: real estate, mortgage, loan)

[Daisey31]

Apparently this just passed. My 74 year old Father lives with us and is moving with us to Austin. I wonder what the legal ramifications would be of putting him on title with us. I have two concerns about this. A) He gets very ill and the property gets attached to pay his medical bills or B) What happens to the property if he dies? Do we pay inheritance tax on a third? Anyone else in this situation?

[austin-steve]

I think that would be seen as a tax evasion ploy, and there might be consequences other that the logistical ones you mentioned. I wouldn't go there.

I actually voted against this measure, to lower Property Taxes for Seniors. If one reads the fine print and does the math, it's a bad deal for the rest of us and too good of a deal for the Seniors. In other words, they are relatively better off going forward than before any of the tax relief was enacted.

But who in the world is going to vote against giving a tax break to old people? Only people who read the finer points and who are offended by poorly written legislation.

[Taterhead]

Originally Posted by austin-steve

I think that would be seen as a tax evasion ploy, and there might be consequences other that the logistical ones you mentioned. I wouldn't go there.

I actually voted against this measure, to lower Property Taxes for Seniors. If one reads the fine print and does the math, it's a bad deal for the rest of us and too good of a deal for the Seniors. In other words, they are relatively better off going forward than before any of the tax relief was enacted.

But who in the world is going to vote against giving a tax break to old people? Only people who read the finer points and who are offended by poorly written legislation.

Steve, are you saying this tax relief is not so good for seniors? I was excited to hear about this when my son called me this morning, is there a link to read about it somewhere?

Debbie....

[Zzyzx]

Originally Posted by Daisey31

I wonder what the legal ramifications would be of putting him on title with us.

I have exhausted every angle including this one, putting a parent on title to decrease my property taxes. Not really an option for me.

I'm all for good schools and all, don't mind paying a bit extra, but 1.68% come on. What adds insult to injury in my neighbor across the street has about the same house with a lower appraisal, has 4 girls and gets a tax deduction for them.

[austin-steve]

Steve, are you saying this tax relief is not so good for seniors?

No, I'm saying it's too good for Seniors.

I'll try to explain it without getting too longwinded.

The tax relief for you and I, which was passed last year, is still subject to increases based on property values because it was simply the tax rate that was reduced.

I did the math on this last year. For a typical $200,000 home in Austin receiving the total $0.50 (50 cents) reduction in the School Tax portion of the total property tax bill, the dollar value of that entire reduction will be wipied out by a 16% appreciation in the assessed property value.

Once your $200,000 home increases 16% in value, you're back to paying the exact dollar amount you paid before. So, although it is a welcome reduction in the tax rate, the net result is nothing to get excited about, in my judgement, because the dollar amount paid for some is already higher than it was before the tax break a year ago due to appreciation (though still lower than it would have been without the tax break), and it will keep rising with value increases in coming years.

On the other hand, the deal we just voted to give the Seniors, reduces their tax burden by a flat dollar amount, not a tax rate multiple. They get a new permenant FROZEN number. Unlike the rest of us, for whom the "tax relief" is temporary from a "dollars paid" standpoint, the Seniors have a reduction in dollars from what, for most of them, was already a SUBSTANTIALLY lower property tax amount than the rest of us pay.

Think of it like this, though not a perfect analogy. It would be like your Mortgage Company letting you pay a smaller payment for two payments on your loan, but the payment eventually resumes at the same amount as before and keeps growing.

The Senior, on the other hand, get's his payment reduced permenantly from an amount that was already lower than yours, and it stays frozen and never goes up again as yours does.

Whether or not Seniors are deserving of such a great deal is a separate debate. I personally don't think they are, but I know I'm in an unpopular minority so I don't want to argue that point.

If you want an MBA Level Understanding of the history of Property Taxes in Texas, The Real Estate Center at Texas A&M has a great article in the current issue of the Tierra Grande Magazine. You can read it here:
http://recenter.tamu.edu/tgrande/vol14-2/1808.html (broken link)

[Daisey31]

Originally Posted by austin-steve

Whether or not Seniors are deserving of such a great deal is a separate debate. I personally don't think they are, but I know I'm in an unpopular minority so I don't want to argue that point.
http://recenter.tamu.edu/tgrande/vol14-2/1808.html (broken link)

Unpopular or not, I am with you. At least in regard to the current seniors. Alot of this generation got retirement packages from their employers AND will get the last of the Social Security that WE have paid unprecedented amounts into.
As for my Dad going on title, he is contributing on a monthly basis to the mortgage and I can't claim him as a dependant because he still has an income. I am not trying to do anything illegal, I am just curious as to the ramifications of rightfully putting his name on the title.

[Taterhead]

Steve you explained it perefectly, thank you

[romesq]

Daisy, if you place your father's name on the title, I believe that you will have given him a gift of a portion of the equity. That portion may well exceed the annual gift tax exemption (currently $12,000 on the federal level) that you can utilize without incurring the obligation to file a gift tax return. Also, putting him on the title holds him out as owner, since he would apply for the tax exemption. As an owner, his interest is his to dispose of, which could run counter to your interests. Just not a good idea for small benefit, since the reduction in taxes would apply only to his interest, not to the entire property.

Additionally, if you hold title as JTWROS (you mention "us" as owners but do not specify who "us" is or how you hold title), I don't think putting your dad on the title is an option at this point.

As for claiming your dad as a dependent for FIT purposes, you may wish to check with an accountant or tax attorney. The test for claiming a parent as a dependent is not whether that parent has income but is based on whether you can document that you provide more than one half of his support.

[Daisey31]

Originally Posted by romesq

Daisy, if you place your father's name on the title, I believe that you will have given him a gift of a portion of the equity. That portion may well exceed the annual gift tax exemption (currently $12,000 on the federal level) that you can utilize without incurring the obligation to file a gift tax return. Also, putting him on the title holds him out as owner, since he would apply for the tax exemption. As an owner, his interest is his to dispose of, which could run counter to your interests. Just not a good idea for small benefit, since the reduction in taxes would apply only to his interest, not to the entire property.

Additionally, if you hold title as JTWROS (you mention "us" as owners but do not specify who "us" is or how you hold title), I don't think putting your dad on the title is an option at this point.

As for claiming your dad as a dependent for FIT purposes, you may wish to check with an accountant or tax attorney. The test for claiming a parent as a dependent is not whether that parent has income but is based on whether you can document that you provide more than one half of his support.

Thank you so much for your help. That was of great assistance!

Gina

[romesq]

Daisy, one more think I just remembered. Your mortgage note may also have prohibitions that could cause problems were you to add another party to the title. Some "due on sale" clauses might be triggered.