Because of the various state rules and regulations, we want to remind you that this post is not meant as a guide, but only as a reminder, if you are in the appropriate state, and in the appropriate situation, you may be able to Homestead your home, saving your property taxes (property tax exemption.)
If you hit up Homestead on your favorite search engine you’re likely going to get an article about moving to the country somewhere and building a log cabin home to retire.
That’s not what this is about.
We want to remind those especially that live in Texas who may have moved into a new home on last year on or before January 1st to be sure in Homestead their home in order to have a significant savings on your taxes.
Those living in other states should check their central appraisal district website to see the rules and regulations – this is likely a timely reminder as most just paid the property tax … or are about to pay them.
Not all states offer Homestead exemptions and many states do offer them but do no good because of the tax structure of their states, thereby making it important that you check each situation.
All of the above being said, using our home state of Texas as an example, there is a significant tax savings by homesteading your home.
In many states, including Texas once again, there are very special exemptions for those age 65 and it’s likely the January 1 residence date may not apply for those turning age 65. Special tax considerations are given for those 65 and older to school, property, other taxes with frequently freezes in escalations as part of the exemption … In order to qualify, you most likely will need to raise your hand (fill out another form) …notifying your taxing authority of your new tax saving age.
Property tax exemption
A homestead exemption is most often on only a fixed monetary amount, such as the first $50,000 of the assessed value. The remainder is taxed at the normal rate. A home valued at $150,000 would then be taxed on only $100,000 and a home valued at $75,000 would then be taxed on only $25,000.
The exemption is generally intended to turn the property tax into a progressive tax. In some places, the exemption is paid for with a local or state (or equivalent unit) sales tax.
- California exempts the first $7,000 of residential homestead from property taxes.
- Colorado allows a 50% deduction for up to the first $200,000 (equivalent to a $100,000 exemption if the property is valued at $200,000 or above) for seniors (over age 65) who have lived in their property for ten consecutive years.
- Georgia allows a 1% HEST only in a few counties.
- Florida‘s homestead exemption allows an exemption of 160 acres outside of a municipality and one-half an acre inside a municipality.
- Kentucky, for 2019 and 2020, the exemption has been set at $39,300. Once it is approved, homeowners who are 65 or older do not need to reapply for the homestead exemption each year.
- Louisiana exempts the first $7,500 of residential homestead from local property taxes.
- Michigan exempts the homeowner from paying the operating millage of local school districts.
- Mississippi exemption from all ad valorem taxes assessed to property; this is limited to the first $7,500 of the assessed value or $300 of the actual exempted tax dollars.
- New York‘s School Tax Relief (STAR) program exempts the first $30,000 of a primary home’s assessed value from school district taxes; the exemption is limited to owners with incomes under $500,000. Additional exemptions are available for people over 65 with a limited income. The STAR program applies only to school taxes; no homestead exemption exists for taxes levied by other municipal entities. New York prevents a New York resident claiming this exemption if the New York resident owns property in another state and claims a similar exemption in that other state.
- Oklahoma allows a $1000 deduction of the assessed valuation, about $75 to $125 of savings per year, if owners file for homestead exemption with the local county clerk.
- Rhode Island exempts the first 20% of the home value from property taxes.
- Texas allows a deduction, with additional exemptions available for county taxes, people over 65 and people who are disabled. It also requires school districts to offer a $25,000 exemption (but not other taxing districts, such as cities and counties). Texas further limits the assessment increase on a homestead to 10% of the prior year’s value.
In most cases, there is a deadline for filing your Homestead Exemption, so do not dilly dally around or you may lose that tax savings at the end of this year or early 2024!
Just a friendly reminder to jog your memory, and maybe give you a nice tax savings!
Have a Great “Homesteaded Tax Savings” Day!
John A. Kvale CFA, CFP