Utah S.B. 13 2019 (Income Tax Domicile Amendments) passed during the 2019 legislative session and a requirement for declaring property as a primary residence begins in 2020.
Take a look at the bill here: https://le.utah.gov/~2019/bills/static/SB0013.html
Currently, property taxes for residential properties are 45% lower than an investment property. The new law requires an owner of real property to file a primary residence declaration with their county assessor before May 1 in order to qualify for the dramatically lower residential property tax rate.
Additionally, any time a deed is recorded that changes the vested owner of real property, a new primary residential declaration must be filed. This is true even if individuals are deeding from themselves to a family trust for estate planning purposes.
Let’s look at a real life example of how this change could change your property tax bill next November. In my neighborhood if the County Assessor assumes the market value of my primary residence as $375,000.00, and I do not file the proper residence declaration, the amount of my property tax bill for 2020 will increase from $2,628.04 to $4,778.25.
That’s a $2,150.21 increase in the property tax bill.
The legislature gave quite a bit of freedom to county assessors about how to handle the residential property tax declaration filing. For now, each county assessor seems to be unique in how they will handle this new requirement. Some counties will require harder proof of residency requirements including: updated driver’s licenses, updated voting registration, or proof of the address used on federal or state income taxes. Other counties may require less information for their proof of residency.
The differences in forms and the variety of proof of residency requirements between county assessors make it impossible for a title company to file the primary residence declaration as part of the services provided during settlement and closing. A title company is not responsible for a property owner’s higher tax bill because of the failure to file proper forms with the assessor.
It is up to the property owner to make the effort to file their own primary residence declaration.
This change in the property tax amount may also affect pro-rations, settlement statements & closing disclosures. There may be new lender requirements and REPC/Addenda additions and changes forthcoming as our industry learns about how to best help buyers & borrowers handle these requirements.
For now, Backman Title has added notices about these new requirements to several documents that are signed or given to the buyer/borrower at settlement. These documents include our Escrow General Provisions, utility lists, post-closing checklists, and accommodation recording instructions. These new requirements are also a topic of conversation during settlement.
Title, Real Estate, and lending professionals can provide a great service for our clients by educating them about the new primary residential declaration law and requirements.
Be sure to check the tax amount when working with a net sheet like our handy net calculator: https://backmantitle.com/seller-net-sheet/