Many South Carolinians have been unpleasantly surprised to learn that their property tax bills can triple if they move and then rent out their former primary residence.
Some people have had little choice but to rent their homes, because they moved to take another job or assignment and, due to the real estate crash, were unable to sell the home for an adequate price.
Landlords pass the higher property taxes along to tenants, of course, but you can only do that if you know what the taxes are going to be. Some people have been surprised by the big jump that takes place when a home loses the preferential property tax treatment given to owner-occupied homes.
For many in the military, that situation now has been changed, making it easier and more profitable for active members of the armed forces to rent a property out while they are serving elsewhere.
The new rules were signed by Gov. Nikki Haley in March, following the Legislature's approval of bill H. 3027. Now, certain members of the military can get preferential property tax treatment that's not available to others.
For example, in South Carolina you can only have one "residence" for property tax purposes. Now, members of the armed forces can have two, on a temporary basis for up to two years.
Also, those on active duty in the military who receive "orders for a permanent change of station or a temporary duty assignment for at least one year" can continue to pay preferential owner-occupied tax rates on their South Carolina home even if they are renting out the property.
That's very important, because a qualified residence gets a lower assessment rate, pays no tax for school district operations, and is eligible for other benefits such as the homestead exemption for the elderly.
Sometimes, people hear that qualified owner-occupied residences are assessed at 4 percent of their value, and commercial properties are assessed at 6 percent, and they assume the taxes would be 50 percent higher for commercial properties - for example, a home that's rented out. That's not at all the case.
The property tax bill will roughly triple, if someone moves out of their residence and then rents the home, largely because of the school taxes that apply to commercial properties.
The military property tax benefits require filing paperwork with the county assessor's office in the county where the property is located. Jan. 15 is the deadline to apply, and additional paperwork must be filed by May 15 in subsequent years, showing that the service member is still on assignment, in order to maintain the tax break.
Here's a brief description of the provisions contained in the new rules for active-duty members:
Those with a permanent duty station in South Carolina qualify as a legal resident of the state, even if they are already a legal resident of a different state. Orders filed with the county assessor are considered proof of the person's duty station.
Those who receive a permanent change of station or a temporary duty assignment for at least one year can retain their existing owner-occupied status on a property for as long as they remain on active duty, regardless of any rental income or the owner's relocation, so long as they don't claim owner-occupied status for another property in South Carolina.
Alternatively, those who receive a permanent change of station or a temporary duty assignment for at least one year can claim owner-occupied status on two South Carolina properties as long as they attempt to sell the first one within 30 days of acquiring the second. That provision can last for two years, and continued attempts to sell the first residence must continue.
Those in the military who may benefit from these new tax provisions should contact their county assessor for more details and the necessary paperwork.
Reach David Slade at 937-5552