Depending on the loan acquired, as well as your own personal preferences, you may have options as to how the payments for these components are made.
If you own a home that you also live in, you may be able to take advantage of a significant tax break known as the homestead exemption.
HOW HOMESTEAD EXEMPTION WORKS
The homestead exemption is designed to protect the value of the homes of residents from property taxes, creditors, and circumstances arising from the death of the homeowner spouse.
Homestead exemption allows homeowners to save on property taxes by allowing you to exclude a portion of your home’s value from the tax assessment.
Generally, property taxes for your home are assessed based on the value of your home. The more your home is worth, the more you can expect to pay in real estate taxes.
With homestead exemption, the amount of taxes owed is calculated based on the difference between your home’s value and the exemption amount.
For example, if your home is valued at $300,000 and your state allows a homestead exemption of $50,000, you would only be required to pay taxes on the remaining $250,000.
Homestead exemption can also protect homeowners from creditors in case of financial hardship.
The homestead exemption generally protects a primary residence from forced sale. The exemption was designed to help a surviving spouse and children keep their home. It also protects the homeowner’s residence in the event of bankruptcy.
Homestead exemption also allows a tax-exempt homeowner to vote on property tax increases to homeowners over the threshold via bond or millage requests.
RULES FOR HOMESTEAD EXEMPTIONS
The rules for homestead or property tax exemptions vary by state and municipality.
Most states offer some form of exemption if the homeowner meets some basic prerequisites. However, there are certain states that only offer the homestead exemption to certain groups such as senior citizens, veterans, and those with disabilities or going through financial hardship.
Homeowners will want to consult with a qualified tax attorney to get the most from the homestead law in their state.
Generally, the homestead exemption only applies to a principal residence and can only be claimed by the person or persons who are primarily responsible for the mortgage.
Some states will only allow homestead exemption to be applied to free-standing homes while others also allow you to claim the exemption for condominiums or mobile homes.
The amount of the exemption varies depending on what type of homeowner you are. For example, the standard exemption for a Georgia homeowner is $2,000 while a disabled veteran may qualify for an exemption of up to $60,000.
CLAIMING THE HOMESTEAD EXEMPTION
The process for claiming the homestead exemption varies by state. In some states a general exemption may be granted automatically.
Some state require you to apply only once. In other states, residents are required to apply for the exemption every year.
If you live in a state which requires you to fill out an application for exemption, it’s likely you’ll be required to show proof that you own the property. Veterans, senior citizens and applicants with disabilities may be required to verify their veteran status, age or disability.
The tax assessor’s office in the county where the property is located is responsible for reviewing exemption applications.
Generally, in order to qualify for homestead exemption you’ll need to reside in your home as your primary residence as of January 1st.
FILE YOUR HOMESTEAD EXEMPTION
There are a number of benefits to owning a home instead of renting, the protections afforded by the Homestead Exemption are just some of them.
Be sure and file your homestead exemption so you can take full advantage of the break on your real estate tax bill.