For a long time, we have been advising our clients to check on whether they need to reestablish their homestead or other property tax exemptions after transferring their primary residence to their Revocable Living Trust (RLT). It turns out that this advice may have been way more important than we originally imagined for those living in Fulton County, GA (and possibly other GA counties).
As you are likely aware, home values in the Metro Atlanta area have increased significantly over the past few years. While not commonly known, Fulton County (and some other GA counties) created an annual cap on the increase in property taxes. In Fulton County beginning for the 2019 tax year, this cap (on part, but not all, of the property tax calculation) is set at 3% of the CPI Index (Consumer Price Index for all urban consumers as reported by the US Dept of Labor Bureau of Labor Statistics). However, this cap (at least in Fulton County, GA) is not a direct cap on the property’s value or a direct reduction in the property tax liability. Rather, it is an indirect cap which is created by adjusting the property’s homestead exemption. As a result, having a valid homestead exemption is a key requirement to benefit from the property tax cap. Without such a cap, a property’s tax value and related property tax liability could skyrocket with its value whenever the County authorities get around to revaluing your primary residence property.
Who is eligible for the basic homestead exemption, which is established by the state and voted on by the applicable city, county or school district?
In general, you must meet the following criteria as of January 1st of the tax year:
- You are at least a partial owner on the deed to the property, and you occupy and claim the property as your primary residence.
- You are an individual. In general, owning your primary residence in your RLT during your life will be treated as if it was owned and used by you individually for this purpose.
- The property is not a second home, commercial property, or rental home.
- You cannot claim a homestead exemption on any other property.
- You can no longer claim the homestead exemption if you later fail any of the first 4 requirements.
How do you apply for the homestead and other property tax exemptions in GA?
You need to contact the County Tax Assessor, not to be confused with the Tax Commissioner. For those in Fulton County, an online portal exists at https://fultonassessor.org/exemptions/, and their telephone number is 404-612-6440
What happens to your homestead exemption if you transfer your primary residence to your RLT?
The answer to this question depends on where you live. Fulton County, Ga takes the position that transferring your primary residence to your RLT terminates your homestead exemption, and they require you to take the steps necessary to reestablish it after the transfer. In other words, transferring your primary residence to your RLT is generally not a problem, except for the need to reestablish the homestead exemption after the transfer.
What if you fail to reestablish your homestead exemption by April 1st of the year after you transfer your primary residence to your RLT?
Homestead exemptions apply as of your January 1st status. Approved applications for homestead exemption normally only apply to the current tax year if applied for on or before April 1st of that year. Applications submitted after April 1st of the tax year will apply beginning in the next tax year. So, what if you transfer your primary residence after January 1st of the current tax year, but then fail to reestablish your homestead exemption for the next tax year? The existing homestead exemption should continue to apply for the year of the transfer since it occurred after January 1st. However, it does not continue to the next tax year since it must be effectively reestablished on or before the following April 1st.
Why is this failure to reestablish your homestead exemption on a timely basis so important?
At least in Fulton County, GA, no homestead exemption means no property tax cap. As a result, your property tax bill could go up significantly!
What should you do if you failed to timely reestablish your homestead exemption after transferring your primary residence to your RLT?
The key is to get to the right government administrators and request a retroactive application of the homestead exemption because of the unknowing and innocent mistake that you made. For those in Fulton County, GA, you should contact the Exemption Department at 404-612-6440, ext. 4. You should request that you get all the exemptions that you are entitled to since you may be eligible for other exemptions as well based on age or other criteria.
If you would like to discuss this or other aspects of your estate plan in more detail, please call us at (678) 720-0750 or e-mail us at firstname.lastname@example.org to schedule a consultation. We look forward to meeting you.