Law removes homestead exemption for some seniors and people on disability
by Tim Lockette
Sep 13, 2012 | 7516 views |  0 comments | 21 21 recommendations | email to a friend | print
Karen Roper’s office is about to get a lot of visitors.

Roper, the revenue commissioner for Calhoun County, sent letters to 10,100 county residents last week, warning them about an upcoming change in Alabama’s tax code.

Some of those people will see their property tax go up. Some will pay less. All will have to provide Roper with an income tax return, or else lose a tax exemption that could save them hundreds of dollars.

“It’s complicated, but we’re trying to prepare people the best we can,” Roper said.

Roper and other tax collectors around the state are bracing for the Oct. 1 implementation of a new law that changes the formula for giving homestead exemptions to property owners who are disabled or older than 65.

Under current law, seniors who earn less than $7,500 in federal taxable income per year pay no tax on their primary homes, or on up to 160 acres of land around those homes, Roper said. People over 65 with state-taxable income less than $12,000 get the first $5,000 knocked off the assessed value of their homes.

That same law allows people who are totally disabled to pay no property tax, no matter their income.

Under the new law, the threshold for the tax exemption is raised to $12,000. But disabled taxpayers will have to have an income below that threshold in order to be exempt from city, county and school property taxes. (They’ll still be exempt from state property tax.)

That means some low-income people who now pay some property tax will pay none next year, Roper said. And others, now completely exempt, will pay hundreds of dollars next year.

“Some people will pay more and some people will pay less,” Roper said. “It’s hard to know who, at this point.”

Supporters of the change say the new law closes a loophole that was allowing well-to-do seniors to pay less than some people in poverty.

“We’re returning to the intent of the original law,” said Rep. Jack Williams, R-Hoover, who sponsored the bill in the House earlier this year.

Williams said the homestead exemption rules were passed in the 1980s to give struggling people a break on their taxes. But the $7,500 upper-income limit was no longer realistic, he said. And a years-old attorney general’s ruling allowed some homeowners to claim little or no personal income even though their spouses did have a steady paycheck, he said.

“You could be making a quarter of a million dollars a year, and your spouse could be on disability, and you’d pay no tax on your house,” he said.

Williams said he didn’t consider the change a tax increase, saying that the bill was “revenue neutral” — in other words, that it wouldn’t affect state revenue at all.

Cities, counties and school boards, on the other hand, could see a slight dip in revenue. Frank Gitschier, the House fiscal officer at the Legislative Fiscal Office, said the change could cost local governments and school boards about $6 million statewide, due to the number of taxpayers newly eligible for an exemption.

But for those whose tax bill will go up, that’s cold comfort.

“It feels like they’re saying that if you’re a disabled veteran, you’ve got to be a desolate veteran,” said Ken Rollins, a local veterans advocate.

Rollins, who served in Vietnam, receives a disability check for service-related medical problems. Rollins said he’d discussed the tax change with Roper — and discovered that his property tax bill will likely go up by $399 per year.

Rollins said his disability benefit placed him above the $12,000 threshold, and he said that’s likely true of any veteran who is fully disabled.

“If you’ve got an Afghanistan veteran who is an amputee, you don’t want him to have to pay more,” Rollins said.

People who apply for the exemption will have to take a tax return to the revenue commissioner’s office as proof of income, or else certify that they didn’t file one, Roper said.

Legislative records show that the bill passed 100-0 in the House and 34-0 in the Senate, with a few members voting present. Asked why he supported the bill, Rep. Randy Wood, R-Anniston, said it was just closing a loophole created by an attorney general’s decision.

“This is something they should have been paying all along,” he said.

Assistant Metro Editor Tim Lockette: 256-235-3560. On Twitter @TLockette_Star.

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