Those who go from renters to buyers will encounter a new kind of tax as a homeowner: property taxes. Location determines if, and how much a homeowner can potentially save through a homestead tax exemption, and while your mind is focused on taxes (albeit a different type of taxes), it’s time to do your research and possibly file an exemption of your own.
First thing’s first: What defines a homestead?
Though specific states and counties may differ on the exact definition, most generally define a homestead as “a separate structure, condominium or a manufactured home located on owned or leased land, as long as the individual living in the home owns it.” In some states, such as Texas, “A homestead can include up to 20 acres, if the land is owned by the homeowner and used for a purpose related to the residential use of the homestead.” A homestead tax exemption is available in most, but not all, states.
What is the homestead exemption, and how does it work?
Homestead exemptions in the United States were created to protect homeowners from creditors and property taxes by protecting “the value of [a homeowner’s] principal residence.” This longstanding tax policy helps to encourage homeownership in theory. In practice, this means that states exempt a flat dollar amount or a percentage of home value from residents’ property taxes; the type and amount varies by state, and sometimes district, depending on local laws.
As the name implies, a flat rate exemption means homeowners receive the same dollar amount exemption whether their homes are assessed at $75,000 or $200,000. If a percentage of home value determines the tax break, the exemption amount for a taxpayer will vary depending on the specific assessed property value.
How can I find more information about my local property taxes?
Many states and counties require applications in order to apply for homestead exemptions. For information related to a specific area, it’s always best to check with a qualified tax professional and/or the official websites of local government agencies that assess property taxes in the county or state.
If you’re hoping to call yourself a new homeowner soon, we can put you in touch with the mortgage experts—because it’s us! Contact Open Mortgage to meet with one of our friendly Loan Originators today.