As a homeowner, you may be familiar with the Homeowners' Exemption, a benefit that helps reduce your property taxes. However, there's another exemption called the Homestead Exemption that serves a completely different purpose. Below is our explanation of both and how each of them works.
The Homeowners' Exemption is a property tax benefit available to eligible homeowners. Its primary purpose is to lower the annual property tax bill for your primary residence. The amount of the exemption varies by location, but it typically reduces the assessed value of your home, resulting in a lower property tax bill.
To benefit from the Homeowners' Exemption, you need to meet the following criteria:
- The property must be your primary residence, meaning you live in it for the majority of the year.
- You must own and occupy the property as of a specific date, usually January 1st of the tax year.
- In most cases, you must file an application with your local county assessor's office to claim the exemption.
The Homeowners' Exemption is an excellent way to reduce your property tax burden, which can save you money each year.
The Homestead Exemption is designed to protect the equity in your home from certain creditors in the event that you owe them money. This exemption has nothing to do with property taxes. The purpose of the Homestead Exemption is to provide a legal safeguard for homeowners facing financial difficulties. Key points to understand about the Homestead Exemption include:
- The Homestead Exemption shields a portion of the equity in your home from being used to satisfy certain debts, such as judgments resulting from lawsuits or medical bills.
- The amount of equity protected varies by state, and some states even have unlimited Homestead Exemptions. In states with a capped exemption, the protected equity amount can range from a few thousand dollars to hundreds of thousands of dollars.
- To benefit from the Homestead Exemption, you typically need to file a declaration with your county or state government, specifying the property as your homestead.
- Similar to the Homeowners' Exemption, the property must serve as your primary residence.
As a homeowner, it's important to use both exemptions to cut property taxes and protect your home's equity during financial challenges. Check with local authorities for eligibility and application details.
If you own your personal residence, you’ve likely taken advantage of the Homeowners’ Exemption, which can reduce your annual property taxes.
There is another exemption, known as the Homestead Exemption, that is often confused with the Homeowners’ Exemption, but actually serves a completely different purpose.
A Homestead Exemption is designed to protect the equity in your home in the event that you owe money to a judgment creditor. It has nothing to do with your property taxes.
Do you need to file something with the county to get the Homestead Exemption? How much of the equity in your home is protected?
In this week’s episode of Important Things Estate Planning Attorneys Don’t Always Tell You we explain the difference between the Homeowners’ Exemption and Homestead Exemption, and how each one works.