Property Tax Considerations for Nantucket Residents
Should the Select Board consider lowering property tax burdens for year-round residents, even if it means higher taxes for seasonal residents?
Recently, voters green-lit over $200 million in spending during Nantucket’s annual town meeting, which could significantly affect the tax obligations of local homeowners. For instance, a homeowner with a property valued at $2 million may face a tax increase of around $474.
But the Select Board has the authority to adjust these figures if it chooses. It might be able to ease some of the tax pressure on year-round residents, yet this would inevitably lead to increased taxes for summer homeowners or year-round residents with high-value properties.
Residential tax exemptions allow municipalities to redistribute the tax burden from lower-value, owner-occupied homes to vacation homes and other higher-value properties not primarily occupied by their owners, including vacant lots. This works by allowing a portion of the value of owner-occupied homes to be exempted from local property taxes. To balance this out, the non-exempt portion is taxed at a higher rate.
Currently, Nantucket’s residential tax exemption stands at 25%. The Select Board decided in December to maintain this rate, keeping the option open to increase it if voters endorsed substantial spending.
“Given the expenses we’re anticipating, we believe it’s wise to reserve some options,” noted Select Committee Vice Chairman Matt Fee at that time.
And that’s exactly what has unfolded.
“I support the increase, especially in a year like this with so many significant projects,” remarked Jill Wiese, a candidate for the board and chair of the finance committee, at recent forums organized by the Nantucket Civic League. “If we see a more significant year ahead, we might need to increase it further. Conversely, if fewer projects are on the table, we might be able to lower it a bit.”
During a December public session, various task force members proposed holding a meeting, potentially this spring, to revisit the exemption amount.
Brooke Mohr, a Select Board member, suggested the board might want to contemplate raising the exemption to 30%. “I think now is the right moment to consider 30%,” she said. “Supporting capital projects should have backing from voters, and some relief on tax bills for year-round residents could leave us with more room to address our growing capital needs.”
Due to Nantucket’s designation as a seasonal community under a new state law, the maximum residential exemption can reach up to 50%. This cap is determined by the island’s average home value, currently sitting at $3,597,109. Thus, a 25% exemption would effectively cut the assessed value of an eligible property by $899,277 for tax purposes.
“We’re always weighing our risks and ensuring we have reserves,” remarked Planning Board member Hilary Hedges Rayport. “For seasonal communities, we can elevate the exemption to 50%. This could ease the burden for year-round residents and give us more flexibility in addressing environmental initiatives, like the sewer expansion in the Somerset area.”
A 30% exemption would lower the average home value on Nantucket by $1,079,132. In contrast, a 50% exemption would reduce the assessed value significantly by $1,798,555 when calculating property taxes. However, it’s important to note that because of the resident tax exemption, assessed property values cannot drop below 10% of their actual worth.
Not everyone is in favor of raising the exemption.
“Everybody loves the idea of voting for something like this, but nobody wants to foot the bill,” said Clifford Williams, a candidate for the Board of Selectmen. “I’ll consider the increase, but if people are supporting massive expenditures, they should also be prepared for the financial consequences and perhaps approach these spending decisions more conservatively.”
The resident tax exemption system can be somewhat misunderstood. Notably, commercial property tax rates remain unaffected. The proportion of tax paid by residential properties stays constant, regardless of the exemption, meaning that increasing the exemption only shifts the responsibility among different residential properties.
