To paraphrase an old saying, our homes are our castles. We pour a lot of our hard-earned money into taking care of them, decorating them, and maintaining them. We also pay a mortgage, insurance, and property taxes. In general, the more valuable your home is, the higher your property taxes are. It only makes sense. However, some homeowners are eligible for something called a homestead exemption, which results in a lower property tax bill.
The homestead exemption, in a nutshell, lets you exclude a portion of your home's property taxes from tax assessment. Depending on the homestead exemption laws in your state, you could save hundreds of dollars on your property taxes. Every state is different with its eligibility requirements, so make sure you check the laws in your particular state and county.
Continue reading for details about the homestead exemption and how you can apply for one.
Homestead Exemptions Explained
The homestead exemption applies only to a primary residence. This means that you can't claim the exemption if you have a vacation home or rental property. The type of home you own also comes into play. Some states only allow the exemption for free-standing homes, while other states allow it for mobile homes or condos. Some states have no homestead exemption law at all.
Basically, the homestead exemption excludes part of the value of your home from your property taxes. Here's an example. Suppose your home is worth $150,000 and the homestead exemption in your state is $25,000. This means that you only have to pay property taxes on $125,000.
Each state offers different types of homestead exemptions. Here are a few examples:
- School tax exemptions -- set exemption amounts for school taxes
- County taxes exemptions -- set exemption amounts for special local taxes
- Age 65 and older or disabled exemptions -- additional or higher exemptions if you meet these criteria
Again, the value of your exemption varies from state to state. Most set a fixed dollar amount. Some homeowners may be eligible for a higher exemption rate based on certain factors, or can continue to receive the homestead exemption even if they temporarily move away (just as long as you don't establish a primary residence elsewhere).
If your adult children or other relatives live in the home with you, they can only claim a homestead exemption if they also have an ownership interest in the home. Find out how to apply for a homestead exemption next.
Applying for a Homestead Exemption
Like the value of the homestead exemption itself, the process of applying for it varies from state to state. Some states apply a general exemption automatically, while in other states you have to apply [source: Lake].
Generally, when applying for a homestead exemption, you must provide the following information:
- Evidence of ownership or interest in the residence: Usually, your name is already in tax records as the owner. To be on the safe side, have a copy of the deed, tax bill, or another document proving you are the owner of the residence.
- Proof you live in the premises: A vehicle registration, voter registration, or tax return should fill this requirement.
- A valid Social Security number.
- If you're a senior citizen or disabled, you may have to provide further information.
You can apply for your homestead exemption via mail or in person. You may be able to apply online too; check out your local county's website to see your options. Once you purchase your home, apply for your exemption by your state deadline for the tax year in which you want to qualify. Often this means by March 1 for first-time residents and January 1 each year after. If you miss that deadline, you will have to wait for the next year to apply, and miss out on your exemption [source: Crapo].
In most states, once you apply for a homestead exemption, you don't have to reapply every year. The exemption is automatically applied each year. However, if you move, then you need to fill out a new application -- a homestead exemption is non-transferrable.
For more about the homestead exemption, check out the links on the next page.
- Combs, Susan. "Residence Homestead Exemption Frequently Asked Questions." Window on State Government. 2014. (Oct. 5, 2014) http://www.window.state.tx.us/taxinfo/proptax/exemptions/residence_faq.html
- Crapo, Ed. "Available Property Tax Exemptions and how to qualify for them." Alachua County Property Appraiser. 2014. (Oct. 5, 2014) http://www.acpafl.org/exemptionslist.html
- Lake, Rebecca. "How Does Homestead Exemption Work?" Zacks. 2014. (Oct. 5, 2014) http://finance.zacks.com/homestead-exemption-work-5597.html
- Sarasota County Property Appraiser. "Overview for Qualifying and Applying for a Homestead Exemption." 2014. (Oct. 5, 2014) http://www.sc-pa.com/homestead/overview/
- Stone, Georgia L. "What You Need to Know about Homestead Exemptions." American Bar Association. 2014. (Oct. 5, 2014) http://www.americanbar.org/publications/young_lawyer_home/young_lawyer_archive/yld_tyl_june07_stone.html