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Dept. of Revenue discusses raising income cap for property tax exemption

MONTGOMERY, Ala. — During the inaugural meeting Thursday of the new Ad Valorem Advisory Council, some members advocated for lawmakers to raise the income cap on the state’s Homestead Exemption program, which exempts those 65 years and older from property taxes.

More than three decades ago, Alabama lawmakers raised the income cap for property tax exemptions from $7,500 to $12,000, meaning Alabamians 65 and older making less than $12,000 were exempt from property tax. Billy Hammock, revenue commissioner for Lauderdale County and member of the council, suggested it was time to update that number.

“I pulled poverty levels in 2023 in Alabama,” Hammock said. “For one individual in 2023, it’s $14,580. For a family of two, it’s $19,720, (and) a family of four is $30,000. I just think this has been a while since this might have been looked at.”

Billy Hammock, revenue commissioner for Lauderdale County and member of the Ad Valorem Advisory Council.

The council was created through legislation this year and makes recommendations to Revenue Commissioner Vernon Barnett. Changing tax rates would require legislative action, but Barnett concurred with Hammock in that the multi-decade old cap of $12,000 may be outpaced in 2023. He called the matter a “very timely topic.”

“The last thing any of us want to do is cause people additional grief, especially right now, a lot of people on a fixed income are really struggling,” Barnett said. “It’s shocking how expensive everything’s gotten.”

While inflation has cooled in recent months, food costs have not come down, rising 10.9% in 2022 over the previous year, and 4.3% in 2023. COVID-related supply chain disruptions, the war in Ukraine, as well as corporate price gouging have all been named as contributors to rising costs.

For seniors on a fixed income, Hammock told Alabama Daily News that something as simple as cashing out on retirement is often enough to put someone over the income threshold, giving them a surprise property tax bill in the spring.

“If you make $12,000 or less and over 65, you’re tax exempt in Alabama; that needs to be raised,” Hammock said. 

“All of us bought these IRAs in the 1980s, and now we’re getting to that age and you’ve got to cash them out. Well, they become taxable income because that was a deferred tax, so now, you go and cash it out and you buy a car, you’re over that limit of taxable income, so now you have to pay property taxes.”

Hammock told ADN that ideally, the income cap for the Homestead Exemption program should be raised to somewhere between $25,000 and $30,000, and that he was hopeful lawmakers would consider his proposal during the 2024 legislative session.

“Everything has went up, and you just don’t want to penalize people that are not making enough money, and that’s what it was set up for, to keep from overtaxing the people that don’t have the money anyway,” Hammock said. 

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