How Does A Homestead Tax Exemption Work?
Melissa Brock4-minute read
October 22, 2021
When you face financial hardship such as a debilitating illness, loss of your home or the death of your spouse, a homestead tax exemption can offer a major benefit.
Keep reading to find out whether a homestead exemption is available to you in any one of these situations or another setback you might encounter.
What Is A Homestead Exemption?
A homestead property tax exemption can protect you and your home from property taxes and creditors by shielding a portion of your property’s assessed value. The exemption can benefit you in the event of bankruptcy or a spouse’s death.
A homestead exemption can protect your home’s equity in the following ways:
- Pause the forced sale of a property.
- Provide ongoing property tax relief for a surviving spouse, senior, disabled family member, a veteran or someone on active duty.
- Give a surviving spouse temporary shelter and potential ongoing property tax relief.
A homestead exemption cannot:
How A Homestead Tax Exemption Works
Homestead exemption laws vary on a state-by-state basis. For example, some states automatically offer a homestead exemption. In other states, eligibility depends on your income level, property value, your age, a disability or veteran status – and you may have to fill out an application.
Your local taxing authority will have more information about how your particular homestead exemption works, but know that your homestead exemption is generally determined based on your home’s assessed value.
How do you determine the final amount of your home exemption? You can expect either a flat-dollar homestead exemption or a percentage exemption. Here’s how they work:
- Flat-dollar homestead exemption: In a flat-dollar homestead exemption, the amount is lowered by a specific number. For example, let’s say your home is valued at $200,000 and your state allows a homestead exemption of $20,000. You would only pay taxes on $180,000.
- Percentage exemption: In a percentage exemption, the taxable value of your home gets reduced by a certain percentage. Let’s say your homestead exemption is 20% and your home is worth $200,000. You’d pay taxes on $160,000.
Can I Qualify For The Homestead Exemption?
You’ll need to fulfill specific requirements to become eligible for a homestead exemption:
- The home must be your primary residence, not a second home or investment property.
- You must earn a low income.
- Other eligible taxpayers include senior citizens, veterans or disabled persons.
- If you or the surviving spouse moves from this primary residence, you or they must refile for the exemption.
- You must be a U.S. citizen or permanent U.S. resident and a resident of that particular state in which you apply for the exemption.
- You cannot claim or receive any type of tax exemption on any other property in the U.S.
How To File For A Homestead Exemption
First, gather the materials you need for your homestead exemption application (some states may or may not require the following materials):
- Personal identification
- Tax returns
- Verification of ownership, which could include your deed to the property (warranty deed or quit-claim deed), most recent county tax bill or other documentation that proves property ownership
- Driver’s license and vehicle registrations (must reflect the address of the property you are filing the homestead exemption on)
Depending on your reason for applying for the exemption or your own particular situation, you may also need:
- Social Security numbers through a valid Social Security card or Medicare card
- Military identification card
- Signed by the person receiving the exemption or the individual with the applicant’s Power of Attorney (must provide copy of POA document at time of application)
- Resident alien card if you’re not a U.S. citizen
- If you move from another state, a document from the county appraiser or assessor stating that you do not have tax exemptions in the state from which you moved
- A vehicle registration card, voter registration card or a recorded declaration of domicile
- List of all other properties nationwide
- Verification of total household income (could include a copy of your federal tax return or wage-earning statements) for each member of your household
- Current Military ID card
- VA Letter showing percentage of combat-related disability
Next, you can apply online on your county tax commissioner’s website or apply in person at your city’s department of revenue or tax office. Search online for that department in your county or city. You can also call your county tax commissioner if you have more questions about homestead exemption regulations in your area or to ask about the process for how to apply.
The Bottom Line
A homestead exemption can protect you and your home from a certain amount in property taxes and also protects you from creditors by shielding a portion of your property’s assessed value.
In order to qualify for a homestead exemption, you need to fit one or more of these requirements and possibly more: Your home must be your primary residence and you must be the primary property owner, you must have low income, or you must have a disability or veteran status.
You must collect specific materials for your homestead exemption application and must apply online on your county tax commissioner’s website or apply in person to qualify for a homestead exemption.
Read more about other tax deductions you could qualify for.
See What You Qualify For
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