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.