The rising property tax bills in changing neighborhoods with rapidly increasing property values may cause long-time homeowners to face displacement or tax foreclosure.
Property tax increases can also lead landlords to raise rents, potentially displacing older adults and households with limited means
Property tax “circuit breaker” is a tool used in many jurisdictions to alleviate these effects on those with limited incomes. This tool caps the amount of property tax that homeowners have to pay as a share of their income. Eligibility for circuit breakers can be restricted to specific populations, such as seniors, persons with disabilities, and veterans.
The circuit breaker program can include step-ups in the threshold at higher income levels, providing the most relief to those with the lowest incomes. Another approach is to vary homestead exemptions by income. By varying the amount based on income, homestead exemptions become sliding-scale circuit breakers. The circuit breaker credit can be processed in three ways: a refundable income tax credit, a direct rebate check, or as part of the property tax bill.
Circuit breakers can be designed to provide relief to both low-income homeowners and renters, using a set formula to convert rent payments into a property tax equivalent
To ensure benefits reach those most in need and to limit program costs, circuit breakers often come with income limits and caps on the maximum benefit. Outreach and education are essential to make sure taxpayers are aware of the program and how to apply. Generally, these programs are administered by the state, particularly when the credit is issued through the state income tax. Localities may be required to cover the cost of the tax benefits, particularly if they offer greater benefits or benefits to specific populations.