Owning a home is likely your biggest asset, but also your biggest expense. Between the mortgage, insurance, unexpected repairs like roof damage, property taxes, and possibly homeowners association fees, your home can take a big chunk out of your wallet.
But fortunately, a homestead exemption can provide a degree of relief from those property taxes. Here’s what you need to know about a homestead exemption.
What exactly is a homestead exemption? Essentially, it’s a law that helps protect the value of your home.
What is a Homestead Tax Exemption?
Essentially, it’s a law that helps protect the value of your home.
Homestead tax exemptions waive a certain dollar amount or percentage of home value from property taxes.
The word “homestead” indicates that the exemption can be used only for the home you spend most of your time in. The incentive applies only to a primary residence, not investment properties or a second property.
Homestead exemptions usually offer a fixed discount on taxes, such as exempting the first $50,000 of the assessed value, with the remainder of the home’s value being taxed at the normal rate. For example, using a $50,000, the taxable value of your home would drop to $250,000, meaning your tax bill would drop to $2,500, saving you $500.
But homestead exemptions don’t just apply to taxes. This provision can also help homeowners shield some of their home’s value from creditors. If bankruptcy or the death of a spouse brings debt collectors to your door, a homestead exemption prevents the forced sale of your primary home. The homeowner is allowed to claim a certain amount of equity in the property as exempt from collection by creditors.
