homestead tax exception

What Should You Know About Homestead Tax Exemptions?

Owning a home involves much more than mortgage payments. You must also budget for homeowners insurance, property taxes, home maintenance, and other expenses

The numbers can add up quickly! That’s why most homeowners are eager to find ways to trim their bills, including keeping their property taxes as low as possible. 

Of course, states and local governments must assess taxes to pay for roads, bridges, education, municipal services, and more. Even though taxes are necessary, you might be paying more than required if you can take advantage of a homestead tax exemption.

Before digging into the specific details, it’s helpful to understand a few basic facts about these programs.

1. Homestead exemptions only apply to primary residences.

When states offer homestead exemptions for property tax relief, the benefit is only extended to owners who occupy their homes. You can’t claim a homestead exemption for vacation homes or rental properties.

2. Program details vary considerably.

Some state and local governments offer these programs as a property tax credit, a property tax exemption, or both. Significant differences exist in who qualifies and how the benefit is calculated.

For example, some states offer a flat amount to all eligible recipients, while others use a percentage of the property’s value. In some states, all homeowners receive the exemption, while other states make distinctions based on unique circumstances such as income, age, disabled or veteran status, and other criteria.

3. “Homestead exemption” also refers to certain legal protections.

It’s important to note that in this article, the term “homestead exemption” only refers to a way to reduce your property taxes. 

However, the term “homestead exemption” also refers to a legal tool that comes into play when filing for bankruptcy, designed to shield homeowners from a forced sale by creditors in particular circumstances. 

For example, a homestead exemption can protect a surviving spouse from having to sell their home. Homestead exemption laws also vary by state.

4. Applying for a homestead exemption.

Some states grant homestead tax exemptions automatically. But in other states, you must apply to secure the benefits, typically through your county assessor’s office.

There may be several ways to apply: in person, online, or by mail. You’ll probably need to complete an application form and provide supporting documentation like proof of ownership, residence, and your Social Security number.

In most cases, you only need to apply once and the benefit will be granted each year, or until your circumstances change.

5. Get reliable answers for your situation.

Since homestead exemptions are unique to each state and there may be additional programs in your local jurisdiction, it’s best to contact the office that manages your county’s taxes, typically called the “[county name] Tax Assessor” or "[county name] Tax Auditor." Include the name of your state, too, since your county's name may be used in another state. 

Additionally, be aware that scammers have used homestead exemptions to entice some homeowners into sending payments for false application fees or supplying confidential information that could result in identity theft.

When exploring homestead exemptions, working directly with your local tax authorities is best.