The Property Tax Circuit Breaker
An Introduction and Survey of Current Programs

PDF of this report (18pp.)

By Karen Lyons, Sarah Farkas, and Nicholas Johnson

March 21, 2007

Related Areas of Research

Summary

Many individuals and families who pay a high share of their income in property taxes are eligible for “property tax circuit breakers”— refunds provided by the state government to those whose property tax payments are deemed too great.  Some 18 states deliver roughly $3 billion per year in circuit breaker programs.[1] 

Circuit breaker programs share a common objective:  to reduce the property tax liability for individuals whose property tax payments represent a large portion of their family’s income.  But the programs that the 18 states offer vary tremendously in scope and administration.

  • In eight states, property tax circuit breakers are available only to senior citizens and people with disabilities; in 10 other states, they are available to families and individuals regardless of age or disability status.
  • In 16 states, circuit breakers are available to both homeowners and renters. Renters qualify based on their rental payments, as it is assumed that property owners pass through a portion of their property taxes to tenants. In one state, only homeowners qualify, while in another state only renters qualify for the circuit breaker.
  • Income ceilings vary widely by state.  A few states allow only taxpayers with very low incomes — less than $20,000 — to receive circuit breakers.  Others, such as Maine, Michigan, Minnesota, and New Jersey, extend their program to middle-income families whose property taxes are high relative to their incomes.
  • Maximum benefits, too, vary widely, from $200 in Oklahoma to $2,000 in Maine.
  • Nine states use a separate, stand-alone rebate process to administer their circuit breaker programs. Nine administer it as if it were part of the income tax, often offering stand-alone rebates to individuals who do not owe any income taxes. [2]  One state administers its circuit breaker through the property tax system.  These differences — and others — can affect public understanding of how circuit breakers work to reduce property taxes and participation among eligible taxpayers.
  • The diversity of circuit breaker models results in great variation in states’ fiscal contributions toward the programs.  In some states, property tax circuit breakers represent a small fraction of property taxes paid – less than 0.10 percent in Oklahoma, Oregon and New York.  In other states, such as Michigan, Minnesota and Vermont, circuit breakers represent over six percent of total property tax collections.

This report provides an introduction to property tax circuit breakers and describes the main features of circuit breaker programs currently being administered in the states.[3] Such features include eligibility restrictions based on whether the taxpayer is a homeowner or renter, on age or disability status, and on income level.  The maximum benefit amounts, how these benefit are administered (i.e. as an income tax credit or state rebate check), and the cost of such programs are also addressed. Future Center on Budget and Policy Priorities analyses will discuss in greater detail how these different state programs compare with one another and the policy consequences of these differences.

Click here to read the full-text PDF of this report (18pp.)

End Notes:

[1] The District of Columbia is considered a state throughout this paper.

[2] Please note that one of Vermont’s programs uses an income tax credit, while the other uses a rebate check. Thus, the state is included in both of those categories.

[3] This paper only looks at statewide circuit breaker programs. It does not take into account optional local programs available within a state.

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