Illinois Senior Citizens Real Estate Tax Deferral

Quick Facts

• Benefit type: Low-interest loan from the State of Illinois that lets eligible seniors defer up to $7,500 in property taxes per year.
• Who can apply: Homeowners age 65 or older with household income under $65,000 who have owned and occupied their residence for at least three years.
• How it works: The state pays your property taxes directly to the county. A lien is placed on the property, and deferred taxes plus 6% simple interest are repaid when the property is sold or transferred.
• Why it matters: Provides cash-flow relief for seniors on fixed incomes facing rising property tax bills, enabling them to stay in their homes.
• Application deadline: March 1 each year for the taxes due the following summer/fall.

Program Overview

Illinois’ Senior Citizens Real Estate Tax Deferral Program operates like a state-sponsored reverse mortgage focused on property taxes. Eligible seniors borrow against their home equity to delay property tax payments. The program, established in 1983, recognizes that property taxes can outpace retirement income. By deferring taxes, seniors can redirect cash toward healthcare, home maintenance, and daily living expenses.

The Illinois Department of Revenue administers the program in partnership with county treasurers. After approval, the state pays the county the deferred amount on the taxpayer’s behalf. The state then records a lien against the property. The deferred taxes plus interest are due when the homeowner dies, sells the property, or otherwise transfers ownership. Heirs can choose to repay the balance to release the lien and keep the home.

Eligibility Requirements

1. Age: The applicant must be at least 65 by June 1 of the tax year for which the deferral is claimed.
2. Residency: The property must be the applicant’s principal residence. Second homes, rental properties, or vacation houses are ineligible.
3. Ownership period: You must have owned and occupied the home for at least three consecutive years. Ownership can be joint with a spouse, siblings, or other parties as long as all owners qualify and sign the application.
4. Income: Total household income cannot exceed $65,000. Household income includes the applicant, spouse, and cohabitants. It encompasses taxable and nontaxable income such as Social Security, pensions, annuities, dividends, interest, and rental income.
5. Insurance: The property must be insured against fire or casualty loss for at least the amount of the deferred taxes plus interest. Proof of insurance is required annually.
6. Equity: Total mortgages, home equity loans, and other liens plus the deferred taxes cannot exceed 80% of the property’s fair cash value.
7. Compliance: Property taxes must be current before entering the program. You cannot defer delinquent taxes owed from prior years.

Exceptions and Special Cases

• Joint ownership with younger spouse: If one spouse is under 65, the older spouse can still apply provided the younger spouse signs the waiver agreeing to the lien.
• Trust ownership: If the property is held in a revocable living trust for the benefit of the senior, the applicant may qualify with supporting documentation.
• Mobile homes: Manufactured homes assessed as personal property are not eligible; the program applies only to real estate property taxes.

Benefit Details

• Annual deferral limit: Up to $7,500 per year. If property taxes exceed that amount, the homeowner must pay the difference directly.
• Interest rate: 6% simple interest per year accrues on deferred amounts. Interest does not compound, making repayment more manageable.
• Lien: The state records a lien that has priority over other liens except for property tax liens. Selling or refinancing the property requires satisfying the lien.
• Repayment triggers: Sale of the property, transfer to someone else, death of the last eligible homeowner, or failure to maintain eligibility (e.g., moving out, income exceeding the limit).

Application Process

1. Obtain forms: Contact your county treasurer or download the PTAX-1017-A application and PTAX-1018-A affidavit from the Department of Revenue website.
2. Gather documentation: Proof of age, income statements (SSA-1099, pension stubs), insurance declarations page, mortgage statements, property tax bill, and proof of residency.
3. Complete the application: Provide detailed income information for all household members, list existing mortgages, and certify residency. All property owners and spouses must sign and have signatures notarized.
4. Submit to county treasurer: Deliver the completed application and affidavit to your county treasurer by March 1. Some counties accept mailed applications; others require in-person submission.
5. Treasurer review: The treasurer verifies eligibility, property value, and outstanding liens. If approved, the treasurer certifies the amount to the Department of Revenue.
6. State payment: The Department of Revenue pays the county the approved deferral amount. You will receive confirmation of the amount deferred and interest terms.
7. Annual renewal: You must reapply each year by March 1. The treasurer may require updated documentation to confirm continued eligibility.

Maintaining Eligibility

• Stay current on other obligations: Pay any portion of taxes not deferred and remain current on mortgage payments and insurance premiums.
• Report changes: Notify the treasurer of changes in income, residency, or ownership. Failure to report can result in program removal and immediate repayment demand.
• Keep insurance coverage: Provide updated proof annually. Lapses in coverage can terminate eligibility.

Interaction with Other Programs

• Senior Citizens Homestead Exemption and Assessment Freeze: You can claim these property tax relief programs in addition to the deferral, reducing the amount you need to defer.
• Property tax installment plans: The deferral applies to the net tax after exemptions. If you use installment plans, coordinate with the treasurer to ensure the state payment covers the deferred portion.
• Reverse mortgages: Homeowners with reverse mortgages can participate if the lender agrees to subordinate the loan to the state lien. Obtain lender consent before applying.
• Medicaid estate recovery: Deferred taxes reduce home equity available to heirs. Discuss implications with estate planners, especially if you anticipate Medicaid recovery claims.

Strategic Tips

1. Calculate long-term costs: Estimate how many years you plan to defer and the resulting interest. For example, deferring $5,000 annually for five years accrues $1,500 in interest, totaling $26,500 due upon sale.
2. Coordinate with heirs: Inform heirs about the lien so they can plan for repayment or sale. Keep copies of annual statements with estate planning documents.
3. Use deferral to fund critical needs: Redirect the cash toward healthcare, home repairs, or debt reduction. Document how you use savings to demonstrate financial prudence if advisors or family members have concerns.
4. Review property value annually: Ensure equity remains sufficient. Rising mortgage balances or declining property values could jeopardize eligibility.
5. Combine with budget counseling: Many Area Agencies on Aging offer financial counseling to help seniors manage cash flow and evaluate long-term affordability.

Common Mistakes to Avoid

• Missing the March 1 deadline: Late applications are rejected. Set calendar reminders and submit early to resolve paperwork issues.
• Omitting income sources: Include all household income, even non-taxable Social Security or VA benefits. Underreporting can constitute fraud.
• Allowing insurance to lapse: Without proof of insurance, the treasurer can terminate the deferral and demand repayment.
• Failing to reapply annually: The deferral is not automatic. Complete renewal paperwork every year to keep benefits active.
• Ignoring lien impact: Understand how the lien affects estate planning. Communicate with mortgage lenders before refinancing.

Example Scenarios

• Widowed homeowner: Eleanor, age 76, owns a bungalow in Cook County with $5,800 in annual property taxes. Her income is $42,000. She defers the full amount each year for four years, accumulating $1,392 in interest. When she sells the home, she repays $24,592 from sale proceeds.
• Couple with high medical costs: Oscar and Lila, both 70, face $6,900 in property taxes and $55,000 household income. Deferring taxes frees cash to pay for Lila’s prescriptions. They also claim the Senior Assessment Freeze to reduce future tax increases.
• Heirs repaying lien: After their father passes, the Martinez siblings inherit the home with $18,000 in deferred taxes. They refinance the mortgage, paying the lien to keep the property in the family.

Frequently Asked Questions

• Is the interest tax-deductible? Interest paid when you settle the lien may be deductible as home mortgage interest. Consult a tax advisor.
• Can I partially defer taxes? Yes. You can choose to defer only a portion of the bill, paying the remainder directly.
• What happens if I move to assisted living? Once the property is no longer your primary residence, you must repay deferred taxes within 90 days of moving or selling.
• Does the program affect Medicaid eligibility? Deferred taxes reduce home equity, which could impact estate recovery. However, the deferral itself does not count as income.
• Can the state foreclose? The state may initiate foreclosure if taxes plus interest exceed the 80% equity threshold or remain unpaid after a triggering event. Staying in communication prevents drastic action.

Additional Resources

• Illinois Department of Revenue Senior Deferral Program
• Application PTAX-1017-A
• Area Agencies on Aging in Illinois
• Senior Citizens Homestead Exemption Information
• Cook County Treasurer Property Tax Portal