For every closing I handle involving a buyer of real estate in South Carolina, at the very end of the closing I always take the time to go over the Legal Residence 4% Application in detail. If your new home is going to be your primary residence, then you should consider submitting your own 4% application to significantly lower your property taxes. In this article, I will go over the basics of the application and answer some frequently-asked questions.
Each county has their own version of a Legal Residence Application, which you can use to claim a primary residence and lower your property tax bill. Each time a deed is recorded, the assessor's office will re-adjust the property tax rate to the standard 6%; however, by filing the Legal Residence Application, you should be able to lower your property taxes significantly. The application itself will ask you various information that you'll need to fill-out, mostly concerned with how you own your home. Just because you may own your home in a trust or an entity like an LLC doesn't mean you can't get the tax break for it being your primary residence; there may just be some additional paperwork you'll need to provide.
In addition to filling-out the application itself, most counties want additional supporting documents to "prove" that the home is, in fact, your primary residence. Most common are copies of your (1) driver's license, (2) vehicle registration, and (3) voter registration, all of which should be updated to reflect your primary residence address. You can update these at any South Carolina DMV office.
Some counties, such as Charleston County, also require a copy of your most recently-filed state and federal tax returns. There is usually information on the application showing you how you can redact some personal information on your tax returns, and I always recommend to clients that they take off as much personal information as they can on those forms. One question I am commonly asked at this part of the discussion is: "What if my most recently-filed tax returns don't show my new address?" You will still need to turn-in the most recently-filed tax return either way; often, the assessor's office will review your application and supporting documents and issue you a letter conditionally approving your application, but you must also submit the next round of tax returns once you file those--oh, and it's on you to remember to do so!
It's important that you carefully read through the application and its instructions, as there may be additional supporting documentation you may need to provide based on other circ*mstances.
Once you have filled-out your application and made a copy of all of the required supporting documentation, you're ready to file--but the assessor's office may not be ready for you quite yet! I always recommend to my clients that they physically take their application and supporting documentation to the assessor's office; that way, if there's some special situation (i.e. maybe they've moved from a state that doesn't have a state tax return), you've forgotten to include one little document, or you have any questions, you will get an immediate opportunity to address it. Otherwise, if you mailed everything in, not only is that a lot of personal information to send through the mail, but if you did forget one little document, it can sometimes take the assessor's office six weeks or more to send you something via snail mail to let you know. Thus, once you've collected everything you need, I recommend that you call the assessor's office to see if they have you logged in their system yet--or else you may waste a trip.
One important thing to remember about the legal residence exemption is not to forget about it! As stated above, each time a deed is recorded for real property, the assessor's office will adjust the property tax rate back up to the 6% level. The difference between filing the 4% application is more than a mere 2% due to the additional exemptions you are able to achieve at the 4% rate, so by forgetting to file the 4% application you're almost tripling the amount of property taxes you will owe!
If you did forget to file your legal residence application, there may be hope yet. By filing now, you may be able to get your taxes re-adjusted and have the 4% rate applied retroactively; however, you can only do so for the previous 2 years--beyond that, you're out of luck.
This article is a brief summary about the Legal Residence 4% Application; each situation is different, and if you have questions about your own application I suggest you seek the legal advice of counsel. This article is meant to provide basic, helpful information and is not intended to provide legal advice or create an attorney-client relationship.
