What Is a Property Tax Deferral?

A property tax deferral is an opportunity to receive a temporary reprieve from paying property taxes to a governmental revenue agency. Depending on the structure of the deferral program, the amount of the deferral may be covered by funds provided by a state or other jurisdictional agency, with the understanding that the amount will be repaid at a later date. Most property tax deferral programs have qualifications that candidates must meet in order to be eligible for this type of assistance with property taxes, and must remain current on the repayment plan in order to remain eligible for future assistance.

It is important to note that a property tax deferral is not the same as property tax forgiveness. With the latter, the taxpayer is granted a one-time release from pay all or a portion of the property taxes owed. Forgiveness plans do not include an obligation to repay the canceled obligation. In contrast, a property tax deferral does require repayment at some point in the future, usually with the aid of some sort of plan that allows the taxpayer to settle the deferral with monthly installment payments. Most plans will also call for assessing a small amount of interest on what amounts to a loan to cover the deferral.

The criteria for obtaining a property tax deferral usually involves factors such as age, health, or level of income. In some jurisdictions, households with under a certain amount of annual gross income may be eligible to participate in a deferral program. Other jurisdictions provide temporary deferrals for taxpayers who are past the age of retirement. In still other situations, property owners who have become disabled and are living on a fixed income may also qualify for this type of assistance.

While the property taxes may be assessed and are payable to a local jurisdiction such as a municipality, county, or parish, it is not unusual for a property tax deferral program to be managed on a state or provincial level. A common structure involves the property owner submitting a formal application for assistance to the agency charged with managing the funds set aside for deferrals and being accepted into the program. The agency then pays a fixed percentage of the property taxes due, leaving the taxpayer as little as three percent of the obligation to settle. At that point, the agency and the taxpayer agree to a repayment plan that will normally involve initiating payments to the agency several weeks or months after the payment to the tax assessor’s office has been remitted. Other plans defer the repayment until the property is sold at some point in the future or until the property owner no longer qualifies for participation in the deferral plan.