Filing for a homestead exemption could put money back in your pocket. In this guide, we'll explore the importance of filing homestead exemption, how it works, and when and how to file to ensure you maximize your savings on property taxes.
Understanding the Basics of a Homestead Exemption
A homestead tax exemption is a valuable tool for homeowners, offering relief from property taxes by exempting a percentage of your home's value or a specific dollar amount. It's important to note that this exemption only applies to your primary residence and cannot be utilized for rental or investment properties. Homestead exemptions are available in 46 states, each with its own set of rules and regulations.
How Does a Homestead Exemption Work?
The details of a homestead exemption are determined by the district, county, or parish of your primary residence. Rules regarding eligibility, application procedures, and the specific details of the tax exemption vary. While some locations automatically apply the exemption, most require homeowners to file for it to receive the benefit.
For instance, in Orleans Parish, Louisiana, to file your homestead exemption you must present proof of ownership, a valid Louisiana Driver's License or State ID, and current utility bills. Once filed, homeowners in Orleans Parish receive an exemption on the first $75,000 of their primary residence's value.
Illustrating the Savings from a Homestead Exemption
To grasp the impact of a homestead exemption, consider an example. Suppose your home is assessed at $200,000, and the property tax rate is 1.6%. In this scenario your property tax bill would be $3,200. However, if you qualify for a $75,000 homestead exemption, the taxable value of the home is reduced by $75,000 to $125,000, resulting in a property tax bill of $2,000—an impressive savings of $1,200.
Varied Exemption Structures
Homestead exemptions come in different forms. Some areas, like Harris County, Texas, use a percentage exemption. In this case, if your home is assessed a value of $200,000, a 20% exemption would mean that only $160,000 is subject to county property taxes, providing a substantial reduction. Homestead exemptions may also have other benefits attached to them. For example in Texas, state law dictates that if you have a homestead exemption, your assessed taxable property value cannot increase more than 10% per year.
When to File for a Homestead Exemption
To be eligible for a homestead exemption, you must own and occupy your home as your permanent residence by January 1st of the filing year. The deadline for timely filing can vary by state, county, or parish, so it's essential to contact your local assessor's office for specific details.
Filing for a homestead exemption is a savvy financial move that can significantly reduce your property tax burden. Whether you're a seasoned homeowner or considering your first home purchase, factoring in property taxes, and exploring potential exemptions should be part of your financial strategy. For over 90 years, the expert loan officers at Standard Mortgage (NMLS#:44912) have been assisting homeowners and homebuyers in navigating the intricacies of property ownership. Consider filing for your homestead exemption today and unlock the benefits of substantial savings.
