Property taxes on your home can add hundreds of dollars a month to your housing costs, but if the house is your principal residence, you may be entitled to an important break known as a homeowner's exemption. Sometimes called a homestead exemption, this designation protects a limited amount of your home's assessed value from property taxes. Follow your state and local guidelines carefully to take advantage of the homeowner's exemption.
An exemption means protection from taxes, seizure or legal claims. When paying federal taxes, for example, a certain amount of your income is exempt from taxation by the IRS. When paying property taxes to a local authority, a portion of your home's assessed value may also be exempt from taxation, as long as the house is your principal residence. The homeowner's exemption can save you a significant amount every year, but you must complete the required paperwork to claim it.
The law on homeowner exemptions varies by state, as does the amount of the exemption. In California, for example, the exemption is available if you lived in the house on Jan. 1 of the tax year, and you must file a claim for the exemption by Feb. 15. In Pennsylvania, the exemption is known as a "homestead exclusion," and the amount of the reduction is allocated to local school districts by the state legislature every year. Pennsylvania exclusions depend on applications filed by March 1 preceding the tax year.
The exemption reduces the property tax by lowering the amount of the home's assessed value on which you pay taxes. Some states supplement homeowner exemptions with additional exemptions. Illinois, for example, offers a senior citizens' exemption and a home-improvement exemption, which exempts any increase in the value up to $75,000 for four years. There are also exemptions in Illinois for the disabled, for returning veterans and for disabled veterans. Hawaii allows a special exemption for those with Hansen's disease, also known as leprosy; the island of Molokai is home to a small leper colony.
If the exemption depends on the amount of time you spend in your principal dwelling, state laws require you to report any change in your home ownership status. If you begin renting the property and living somewhere else, you must notify the property tax authorities. If you own two homes, you can't claim the exemption on both properties. You may be able to legally claim the exemption in more than one state; however, your income tax filing status as a resident in one state would normally lead to revocation of your homestead status in the other.
- Creatas/Creatas/Getty Images
- "How to Fill Out ""Schedule C - Property Claimed as Exempt"" Form"
- Rules for Buying a Non-Primary Home
- How to Buy a Home by Paying Back Taxes Owed
- How to Reinvest Money in a Primary Home From Sale of Property
- Can You Lease to Purchase if an HOA Has Restrictions Against It?
- What Is the the Difference Between Assessed Value & Taxable Value of Real Estate?