- What Is the Homestead Exemption in Illinois?
- How to Calculate Your Ohio Homestead Exemption
- What Happens to My Homestead Exemption If I'm Not on a Loan?
- Do I Need to Refile My Homestead Exemption After Refinancing?
- Can Homestead Exemptions Lower My Tax Bracket?
- How Long Can You Rent Your House Out in Florida & Get Homestead Exemption?
A homestead exemption reduces the value of a home for state tax purposes. Almost all states provide some type of homestead exemption or credit that reduces the taxable value of a home but the amounts and types vary as widely as the states themselves. In general, these exemptions benefit low- and middle-income taxpayers more by sheltering some home value from taxes.
Four states without any homestead exemption are Delaware, New Jersey, Pennsylvania and Rhode Island. Delaware, Pennsylvania and Rhode Island have no laws on homestead exemption. New Jersey has no exemption laws, but does provide a "homestead interest" for a married couple sharing a home. Delaware and Rhode Island do offer dollar exemptions in bankruptcy while New Jersey and Pennsylvania have some very limited protection.
Homestead exemptions can be a flat rate, a fixed-dollar amount, or a percentage of the property value. Fixed-dollar exemptions decrease in worth as the value of the property or general real estate values increase, but the exemption amount does not. Some are income-based. New York, for example, gives a bonus exemption to elderly homeowners with incomes of less than $80,000.
A flat rate will give the same exemption, perhaps $15,000, whether the home is assessed at $60,000 or $500,000. A percentage will give a larger dollar break to more expensive homes. A 15 percent exemption, for example, will cut taxes on a $60,000 home by $180, while the $500,000 homeowner will get a break of $1,500.
There is no uniformity in the way homesteads are judged or exemptions are granted. In most states, however, the exemption is limited to the principal residence of the taxpayer. Most states require filing a request for homestead exemption within a year after acquiring the property and it generally is good for as long as the taxpayer owns the property.
Limits on homestead exceptions vary widely. Florida, for example, grants an exemption of $25,000 from the taxable value of a home, with no upper limit on the value of the property involved. Across the country, California sets a limit of $60,000 on the value of property that can be homesteaded. Texas has no limit on value.