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Reader Question: My mother-in-law is 87 years old. My wife was told at work that there was as exemption for property tax in Alabama for senior citizens once you reach the age of 65. Is this correct and is it automatic or do you have to file for this exemption?
Answer: The timing of your question is perfect since property taxes are due between now and December 31st. Unfortunately, there's good news and bad news. The good news is that if you are age sixty-five or older you are exempt from paying state property taxes. Here's an excerpt taken directly from the State of Alabama web site:
I AM OVER 65. DO I HAVE TO PAY PROPERTY TAXES?
If you are over 65 years of age, or permanent and totally disabled (regardless of age), or blind (regardless of age), you are exempt from the state portion of property tax. County taxes may still be due. Please contact your local taxing official to claim your homestead exemption.
One of my partners, Michael Wagner, CPA, adds, "You have to proactively claim the deduction and every year return a postcard stating you are over 65 and still own the home." You need to apply for the exemption through your county tax assessor's office. Here's a link to every county: CLICK HERE or enter http://revenue.alabama.gov/advalorem/countyoffices/index.cfm in your internet browser.
The bad news is that you cannot 'go back' and get credit for state property taxes paid in prior years when you were eligible for the exemption. In other words, it's a 'use it or lose it' proposition. If you know someone age sixty-five or older, be their hero and remind them of this opportunity.
Reader Question: I hold an actively managed mutual fund that I bought years ago. It has a high expense ratio and I would like to trade it for an equivalent ETF that tracks the same index. I have significant profit in this investment. Is there a way to avoid the taxes in a trade?
Answer: If it were real estate you could do a like-kind exchange and avoid taxes but there's no such equivalent rule for stocks. A couple of possibilities are:
- Gift highly appreciated shares to a charity or donor advised fund.
- Use a Charitable Remainder Unitrust (CRUT).
If you'd like to have me answer your financial question email me at stewart@welchgroup.com and place AL.com in the subject line. Consult your own professional legal, tax or financial advisor before acting upon this advice.
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