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APPROPRIATION COMMITTEE-2.020 ATM 25 March 2020 Appendix D: Tax Relief Programs In early 2004,the Board of Selectmen created an ad hoc Tax Deferral and Exemption Study Committee to explore ways in which the property tax relief available to low and moderate-income senior citizens and other needy residents could be enhanced and made more accessible. Since then, with the guidance of this committee, Town Meeting has taken a succession of steps to expand such relief, for the most part maxim- izing the options that the Town is allowed to adopt under existing state law and, in some cases,using home rule petitions to further increase opportunities for tax relief. The principal programs for tax relief now available to Lexington homeowners are: • A state income tax "Circuit Breaker"program providing a state tax credit for low and moderate- income homeowners and renters age 65 and over(at no cost to the Town). • A tax deferral program under which low-to-moderate-income homeowners age 65 or over may defer any or all of their property tax, after applying any available exemptions,up to half the value of their house. The deferral need not be repaid until the house is sold or transferred. The interest rate applied to each year's deferral is a variable rate designed to match the Town's earnings on its funds. See generally G.L. c. 59, §5, clause 41A. • A tax exemption program under which homeowners age 65 or over with limited income and limited assets other than the value of their home may deduct $2,000 from their annual property tax. See generally G.L. c. 59, § 5, clause 41C. • A locally-controlled Senior Service program adopted by Town Meeting in 2006. • A Community Preservation Act surcharge exemption program. State Income Tax "Circuit Breaker" Low- and moderate-income homeowners age 65 and over whose homes have an assessed valuation not greater than an annually adjusted ceiling may obtain a tax credit on their state tax returns(see table below). Low and moderate-income renters are also eligible for a tax credit. Qualified owners or renters are entitled to a refundable dollar-for-dollar credit on their state income tax, up to an annually established limit,to the extent that real estate taxes and one half of water and sewer bills (in the case of homeowners) or rent(in the case of renters)exceeds 10%of the applicant's income. This program is administered by the Massachu- setts Department of Revenue and has no direct impact on Town finances. The "41A" Deferral Program This program is authorized by G.L. c. 59, § 5, Clause 41A. Although not widely used, it is an important tool because it offers immediate and substantial property tax relief to seniors with significant equity tied up in a residence. Those who qualify may defer any part or all of their property tax for a given year, up to a cumulative total of half the assessed valuation of the property. All deferred taxes are eventually paid when the property is sold or transferred, whether before or after the resident's death. Towns are permitted to set their own interest rates for this program at any rate up to 8%. Lexington's rate is based on a floating Treas- ury rate equivalent to the Town's return on its funds in the year of deferral(recently less than I%). The rate set for each year remains in effect for the life of deferrals granted in that year. In 2008, in response to a home rule petition,the state legislature enacted a special law (Chapter 190 of the Acts of 2008) allowing Lexington to establish a more generous income eligibility limit than that permitted under state law generally.16 Town Meeting most recently raised the income limit from $70,000 to $75,000 in 2019. 16 The special law also permits the Town to adopt a lower age of eligibility than 65, or to condition eligibility on objective criteria of disability or other hardship for persons who would not otherwise qualify based on their age,but the Town has never done so. 57