Disaster Relief
Disaster Relief
This section explains the types of property tax relief available to properties affected by a disaster or other unforeseen damage. Before discussing the specifics of disaster relief, these terms are important to understand for how the relief is calculated and what is available.
Definitions
- Assessed value
- The pre-disaster value set for a building on January 2 of the year of the disaster.
- Reassessed value
- The post-disaster value set after reassessing the damaged building. This does not replace the assessed value.
- Homestead Dwelling
- Only the house and garage of a homestead property. Other outbuildings are not considered homestead dwellings, even if they are classified as homestead or are in the HGA.
- Declared Disaster Area
- The status that must be applied for and may only be granted by the Executive Council.
- The Executive Council consists of the governor, lieutenant governor, attorney general, state auditor, and secretary of state.
- A declared disaster area is distinct from all other local emergency or disaster determinations, and cannot be declared by the county, the Department of Revenue, the governor, or any federal entity.
- Whether or not a property is in a declared disaster area affects the type and quantity of relief that a damaged property is eligible for.
- All relief granted in a Declared Disaster Area is reimbursed by the state.
- For details about the application process, minimum damage requirements, and other information about declared disaster areas, see the Declared Disaster Area page.
- The status that must be applied for and may only be granted by the Executive Council.
Different Types of Relief
There are only three types of property tax disaster relief in statute. These are the local option credit, the local option abatement, and the homestead credit. This relief is available to structures that have been unintentionally or accidentally damaged, or damaged by arson or vandalism by someone other than the owner.
Disaster relief operates on a building-by-building basis, rather than per parcel. Within a single parcel, some buildings may qualify for multiple types of relief, some for just one type, and some for none at all. This flowchart can help determine what relief is available to damaged buildings.
Local Option
Local Option
The local option credit and local option abatement have the same damage and application requirements, but differ in what year they are applied. The abatement is applied in the year of the disaster, while the credit is applied in the year following the disaster.
If the abatement is granted after the property owner has paid their taxes for the year, the county must directly refund them the amount of the abatement.
Available for All Types of Disasters
The local option abatement and credit are available both inside and outside a declared disaster area.
However, if the property is located within a declared disaster area, any credits or abatements granted are reimbursed by the state and are larger in calculation. See the Calculation section for additional details on the difference in calculation.
Basic Requirements
- A qualifying building must be at least 50% damaged or destroyed, meaning the reassessed value post-disaster is 50% or less of the assessed value.
- The property owner must apply, subject to approval by the county board.
- The classification of the building does not affect eligibility for local option relief.
Application
The application is for both the credit and the abatement because they have the same requirements. The application is located in our resources section. The property owner only needs to fill out one application per parcel, even if multiple buildings on a parcel qualify.
Due Dates
- Local option credit is due at the end of the year in which the disaster occurs.
- Local option abatement is due “as soon as practical” after the damage occurs.
The county board may approve or deny the application for the credit, abatement, or both. While some counties may have a policy of not granting abatements, they may choose to ignore this policy for disaster credits, because they are a separate abatement with separate requirements. Regardless of the approach for abatements, we encourage counties to approve applications for credits. The underlying assumption of the disaster credit is that a property tax bill is normally based on a building having the same market value for an entire year, as established as of January 2 of the previous year. However, if the structure loses a portion of its value due to damage by a disaster at some point during the assessment year, the Local Option Credit allows counties to recognize the property’s loss in market value due to the damage.
We encourage assessors to be lenient with the due date for the abatement. If the assessor does set a firm due date, they should ensure that property owners who qualify are informed. If the county wishes to apply to the Executive Council to be a declared disaster area, any abatements must be approved by the county board before the application is submitted to the state on November 1. More information on applying to be a declared disaster area is in the Applying to be a Declared Disaster Area section.
For disasters that occur very late in the year, it is possible that the deadline for the credit (the end of the year) will pass before property owners can apply. The assessor may determine if they will accept abatement applications into the new year, as they are allowed to do so by statute.
State Assessed Property
Utility property that is normally state assessed will be reassessed by the Commissioner of Revenue if the property owner makes application. These applications are granted by the Commissioner of Revenue, however the county board will be notified for the application.
Homestead Credit
Homestead Credit
The Homestead Credit is the other type of property tax disaster relief aside from the Local Option Credit and Abatement. It is only available in declared disaster areas.
Basic Requirements
- The credit is only available for "homestead dwellings"
- Homestead dwellings are just the house and garage of a homesteaded property
- The property must be homesteaded and be classified as 1a, 1b, or 2a
- Homesteaded manufactured homes qualify
- The homestead dwelling must be within a declared disaster area
There is no minimum damage requirement and no application necessary for the Homestead Credit. Once the Executive Council approves the application to be a declared disaster area, all damaged homestead dwellings should automatically receive a credit.
Buildings may not receive a local option disaster credit in addition to a Homestead Credit. Because the Homestead Credit is automatically applied, we recommend that the county use the Homestead Credit if a property qualifies for both. This does not prohibit the parcel from receiving multiple credits, just the homestead dwellings.
As a credit, the property tax relief is applied in the year following the disaster.
Specific Situations
Here's how the Homestead Credit applies in these specific situations.
If a property is approved for a mid-year homestead before the disaster, any damaged homestead dwellings would be eligible for the Homestead Credit if the property is located in a declared disaster area. Because it would meet the definition of a homestead dwelling at the time of the disaster, it would qualify for the credit. If the property is not homesteaded on the date of the disaster, then it would not be eligible for a Homestead Credit.
If a property is receiving a fractional homestead, it would be eligible for the Homestead Credit fractionalized based on the percent of homestead granted. This is fractionalized in the same manner as the Homestead Market Value Exclusion where the credit is calculated on the full value of the property and then fractionalized on the percent homestead granted.
If an individual structure is used for both residential and non-residential purposes, such as a shop on the first floor and a residence on the second, then the part of the structure classified as a homestead dwelling would be eligible to receive the Homestead Credit.
Calculation
Calculation
Calculation for property tax disaster relief involves recalculating the total net taxes using the pre-disaster value and the post-disaster (reassessed) value. The process of calculating the property tax relief for a parcel is:
- Calculate the full net tax on the parcel using the market value established on January 2 of the year of the damage.
- This value should be used even when calculating an abatement for taxes payable in the current year.
- Calculate the net tax on the parcel using the reassessed market value for qualified buildings.
- If a building qualified for either type of relief, use the reassessed value to do the calculation.
- If the building did not qualify for relief, use the January 2 value.
- Subtract the net tax of step 2 from the net tax of step 1.
If the property is located in a declared disaster area, the difference between the two net taxes is the relief amount.
If the property is not located in a declared disaster area, any property tax relief is prorated based on the number of full months that the structure is unusable. This adds a fourth step:
- Multiply the difference in the net taxes (step 3) by the number of full months that the property was not usable, divided by 12.
Disaster Relief FAQs
Disaster Relief FAQs
Below are some frequently asked questions relating to disaster relief.