Believe it or not, many states want to help you reduce the property taxes owed on your primary residence through a homestead exemption. This article will teach you about homestead exemptions and show you how to take advantage of them!
It’s no secret that property taxes make up a significant portion of a state’s tax revenue, especially in states like Florida and Texas that don’t rely on state income tax to generate the necessary revenue to fund their state and local budgets. However, local governments are willing to forgo some of that property tax revenue to encouraging homeowners to live in their county. Recognizing that property taxes can be a significant financial burden on an individual trying to purchase their home, state legislatures have allowed individuals apply for a homestead exemption on their primary residence to reduce their overall property tax burden to make the home more affordable!
How does it work?
Essentially, a homestead exemption allows the homeowner to shelter a portion of the home’s state assessed value from the calculation used to determine property taxes owed to the state. The homestead exemption is only available on primary residence and cannot be used for second homes, vacation homes or investment properties. Typically, the state also requires the homeowner to attest that they also do not claim an exemption on any other residence.
There are several types of homestead exemptions available to homeowners. There’s a general homestead exemption that can be claimed by any homeowner on their primary residence, but there are also special homestead exemptions for other groups such as low-income households, senior citizens, individuals with disabilities and veterans that can increase the amount of your homestead exemption above the general homestead exemption. Make sure that you are selecting all exemptions that apply to you.
How can you apply?
1. Acquired the home before January 1st of the year in which you are claiming homestead. (For example, if you acquire the home in December 2022, you can claim your homestead exemption for 2023).
2. Have a state license or state ID in the state you are claiming a homestead exemption
3. Apply for the homestead exemption by the state-imposed deadline to receive the full exemption for that year. For instance, the deadline in Texas is April 30th, the deadline in Florida is March 1st and the deadline in California is February 15th.
Example of online application portals –
Homestead applications were created to be easy to fill out on your own, without the assistance of third parties.
How much can you save?
The total savings can vary from state to state, but let’s look at a general example. Let’s say the state assessed value of your home is $400,000. You apply for and obtain a homestead exemption of $40,000. The city will multiply the $360,000 value by your county/local tax rate to determine your property taxes. Depending on where you live and your property tax rate, your savings on a reduction of $40,000 in assessed value can range from $400 to well over $1,000 a year.
LendFriend is here to help!
Homestead Exemptions will save you thousands of dollars during your ownership period and we want to make sure you take advantage of your eligible savings from day 1! If you have questions on how to make the most of your homestead exemption, give us a call at 512.881.5099 or apply now, and one of our loan officers will be in touch as soon as we receive the application.
