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What Is A Homestead Exemption And How Do You Apply For One?

Kim Porter4-Minute Read
January 21, 2021

If you pay property taxes on your home, you may be footing a hefty bill. The average single-family homeowner spent $3,561 on real estate taxes in 2019, according to ATTOM Data Solutions.

Fortunately, many homeowners have access to “homestead exemptions,” a legal provision that may provide tax relief and even protection from creditors. Here’s what you need to know about homestead exemptions, how to find out if you qualify, and how to apply for one.

What Is A Homestead Tax Exemption?

A homestead tax exemption reduces a certain amount of your home’s assessed value, which in turn can lower your tax bill. Some states provide the exemption to every homeowner, while others base eligibility on income level, property value, age, disability, or if you’re a surviving spouse or a veteran. In every state, the homestead exemption only applies to your principal residence.

Property tax rates are decided on the local level, so homestead exemptions are a way for state governments to lower property tax bills indirectly.

In addition to lowering your tax bill, homestead exemptions can:

  • Prevent the forced sale of a property: In some states, the exemption also provides financial protection to homeowners who are struggling with unsecured debt. The details vary by state, but take a look at one example to see how it works: Say your home is worth $200,000 and you have $40,000 of home equity (that’s your home’s value minus your mortgage balance). In your state, the homestead exemption protects up to $50,000 of assets. Because your home equity falls within the protected limits, your creditors can’t force you to sell the property and pay them back.

The homestead exemption may also apply to bankruptcies, although the protected limits vary. In states that allow homeowners to protect a specific dollar amount in bankruptcy, the exemption typically ranges from $10,000 to $200,000.  

  • Provide a surviving spouse with shelter or ongoing property-tax relief: The homestead protection typically applies to you, other owners of your home, and family members who live in your home – even after you die. This can provide much-needed protection for surviving spouses or other family members who rely on your home as shelter.

But homestead exemptions have limitations. Generally, they won’t:

  • Stop a foreclosure from happening if the primary owner defaults on their mortgage.
  • Block liens connected to secured debt, such as a mortgage.

How Does A Homestead Exemption Work?

Property taxes are generally based on your home’s assessed value, and the local taxing authority decides how the bill is calculated annually. You may, for example, pay $10 for each $1,000 of property value in a given year. A higher home value translates to a larger tax bill. Homestead exemptions give you a break here by excluding a portion of your home’s value from assessment. The exemption may be calculated as a dollar amount or as a percentage of the property value:

  • Flat-dollar homestead exemption: The taxable value of your home is lowered by a set amount, such as $50,000. So if your home is valued at $200,000 and your county’s homestead exemption is $50,000, then you would only pay taxes on the remaining $150,000.
  • Percentage exemption: The taxable value of your home is reduced by a certain percentage. If your county’s homestead exemption is 15% and your home is worth $200,000, then you would pay taxes on the remaining $170,000.

How To File For A Homestead Tax Exemption

Some states automatically award homestead exemptions, but most require you to fill out an application with the tax collector’s office.

The best place to start is your city or county government’s website. Search for the department that handles taxes – such as the department of revenue or tax – or contact the office via phone call. They’ll provide you with information on who’s eligible, how to apply, and any forms you need to fill out. The application will likely ask you for the type of exemption you’re applying for and information about your property.

Make a note of when those forms are due, which is usually in March or April of the year in which you’re taking the exemption, and check whether you need to file just once or reapply every year.

If you’re applying based on your marital status, age, or a disability, you may need to provide documentation, too.

Details vary with each taxing authority, but you might need to fit one or more of these requirements:

  • The home is your primary residence.
  • You are the primary property owner.
  • Your income meets program requirements.
  • You are disabled.
  • You are a veteran.

FAQs About Homestead Exemptions

Does The Homestead Exemption Work The Same In Every State?

In short, no. The rules surrounding homestead exemptions vary in each state, and they may also vary at the local level. Head to your city or county’s tax department for information. Check the details of the exemption, eligibility requirements, whether you need to submit an application to qualify, and when the application is due.

What States Don’t Have A Homestead Exemption?

All 50 states and Washington, D.C., offer some form of property tax relief, but not always in the form of a homestead exemption.

How Else Can I Lower My Property Taxes?

If you don’t qualify for a homestead exemption, you may be able to lower your property tax bill by appealing your tax assessment. If you believe your home is overvalued, start by contacting your local assessor. 

The Bottom Line

If you qualify, a homestead tax exemption can help you save money on property taxes – but you’ll need to understand the details first, so contact your local tax office for information. Be sure you meet eligibility requirements before claiming the tax exemption.

If you want to claim the exemption to protect your assets, you might also be looking to move and downsize your home. An estate sale can help you get rid of stuff you don’t need and get a fresh start.

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    Kim Porter

    Kim Porter is an experienced personal finance writer who focuses on mortgages, credit cards, student loans, debt and more. She has a B.A. in journalism from the University of Florida. You can find her on Twitter at @kimsavesmoney or on LinkedIn.