Homeowners and surviving spouses can take advantage of this exemption, which provides certain homestead protections
The homestead exemption is a legal provision that can help minimize property tax, protect a home from bankruptcy, or provide certain rights to surviving spouses. These are three different features of homestead exemptions, and they work differently in every state. A homestead refers to a dwelling that a homeowner lives in, whether it is a free-standing house, a condo, or sometimes even a manufactured home. What exactly constitutes a homestead depends on your state; for example, there may be limits on how many acres of land can be included as part of a homestead.
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“Homestead exemption” most commonly refers to an exemption a homeowner claims to lower their property taxes. The homestead tax exemption lowers the taxable value of your home by a certain dollar amount. Not everyone is eligible for a homestead tax exemption; in some states only certain people qualify, like senior citizens, surviving spouses of veterans, or people with a disability. Some states don’t offer a homestead tax exemption at all (though similar property tax credits may exist).
A homestead exemption can also provide other legal protections, like preventing you from having to sell your home after you declare bankruptcy. The homestead exemption may also refer to a feature of probate law, wherein the homestead doesn’t have to be included during probate, and can allocate an allowance for a surviving spouse or children.
The three main ways to use a homestead exemption concern:
Applying for property tax relief
Protecting against creditors so you aren’t forced to sell your home
Providing protections to the homeowner’s surviving spouse
A homestead generally refers to a home that you use as a permanent residence
You can claim a homestead exemption in many states to lower your property taxes
Homestead exemptions may also refer to laws that protect you from losing your home during bankruptcy
Some states’ homestead exemptions ensure a surviving spouse an allowance
When people talk about the homestead exemption, they are most likely referring to the homestead tax exemption , which helps homeowners lower their property tax bills by decreasing the taxable value of their homes, usually by a dollar amount. For example, let’s say the property value of your home is $200,000. If you have a $50,000 homestead exemption, then you would only pay property taxes as if your home were worth $150,000.
Not all states offer homestead tax exemptions and individual counties or cities may also have control over property taxes, so the tax exemptions you can receive vary based on where you live. In Georgia, all homeowners can potentially receive a $2,000 exemption. In Texas, there are multiple types of homestead exemptions, like a general $25,000 exemption for school-related property taxes and one for homeowners age 65 and older. In Florida, the homestead exemption lets you claim up to $50,000 — the first $25,000 of the property's value is exempt from property taxes, and if the property is worth over $50,000, there is an additional exemption of up to $25,000 on non-school taxes only.
Using the homestead exemption may help you save even more because it can freeze your home’s assessed value or limit how much the future assessed value can increase. (If the assessed value were to rise steadily over time, then the homestead exemption would not provide as much property tax relief in subsequent years.)
The main requirement for someone to claim a homestead exemption is that they use the home as a primary residence. Typically the homeowner must be able to prove that they lived there on January 1 to be eligible for an exemption that year.
Some states have a general homestead exemption available to everyone, while other states may limit it to people with a certain income, age, or other eligibility requirements. These property tax exemptions typically help senior citizens (over 62 or 65 years old), veterans, former military members, and people with a disability. Your income may need to fall within a certain income limit to qualify for some of these exemptions. (States that do not have homestead exemption programs may have other types of property tax credit available for seniors, people with disabilities, or people with low income.)
Additionally, an unremarried surviving spouse of a disabled veteran, firefighter, or U.S. service member may be granted a generous homestead exemption for the full value of their home. (We’ll talk more on homestead protections for surviving spouses later.)
To receive a tax exemption you generally need to make a homestead declaration by filling out an application. The deadline is usually at the beginning of the year, often close to Tax Day or your first quarter’s property tax due date. For example, you must apply for a homestead exemption by April 1 in Georgia and submit it to the property appraiser by March 1 in Florida. Check out your county tax department or state tax website for more information, including a homestead exemption application form. Depending on the state the homestead exemption may renew automatically every year after you first claim it.
Common filing requirements include a proof of residency and you may be required to furnish additional documents depending on type of homestead exemption. For example, if your state provides a disability exemption, you will have to provide medical paperwork proving your disability when you apply.
Another facet of the homestead exemption is to protect your home from creditors, especially if you file for bankruptcy. If you owe money, the creditor cannot force you to sell your house to satisfy the debt. This protection doesn’t apply for home loans or if you owe property taxes. If you fail to pay your mortgage or have a lien for unpaid taxes, then the lender or IRS can seize the property.
The homestead exemption may not cover the entire value of your home. The federal government sets an exemption limit that states can use, but most states opt to set their own limit. For example, in Florida the entire value of your primary residence is protected from bankruptcy if you’ve been a resident for at least 40 months. In Missouri the homestead exemption is $15,000. Exemption amounts may vary slightly by county and married couples may receive a higher exemption than single homeowners.
Homestead exemptions, sometimes called homestead allowances, exist as part of the probate code to help a surviving spouse. After someone dies, their surviving spouse and family may be afforded the right to continue living in the homestead as their residence. They may be able to live there, even if the title of the house transfers to someone else, until the surviving spouse passes or the youngest child turns 18 years old.
In some states, the homestead exemption makes it so that your primary residence does not need to be included in a probate proceeding. Probate is the process of proving a will’s authenticity, determining heirs if there isn’t one, and distributing assets. During this time, the value of the deceased’s estate — the collection of all they owned — must be calculated. The estate value can inform probate procedure (and if the estate was worth a lot, it may owe estate tax), but some states may not count the homestead property, or a portion of it, in the estate valuation.
Homestead allowances can provide a surviving spouse with a certain amount of money, which is also protected from creditor claims. This is important because it ensures the surviving spouse receives something even if the estate is insolvent. For example, the surviving spouse may be entitled to a homestead allowance of $15,000. (If there is no surviving spouse, the allowance may be split among the deceased’s minor children.)
In some states, the surviving spouse can claim the homestead allowance in addition to whatever they receive through a will or intestate succession. However, in other states the surviving spouse must choose to claim the homestead allowance instead of their inheritance.
You can write a personalized will and leave a gift for your spouse by through Policygenius.
If you have more specific questions about how much a surviving spouse could receive from an estate or are worried about an insolvent estate, speak with an estate attorney.
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