A homestead exemption gives the homeowner some protection from creditors and may lower taxes on a residential property. To qualify for the exemption, the owner must reside on the property or plan to return within a reasonable time. A homestead exemption can protect the owner's residence from seizure and forced sale for debts unrelated to the purchase of the home. It does not prevent a federal tax lien in some states, including Texas.
Your property must be a homestead to qualify for a homestead exemption. You must be the owner of the property and you must reside in the home for it to qualify as a homestead in most states. Some states define an exempt homestead by rural acreage or city lots; others define it by dollar amounts. Check with your assessor's office or state property tax division to determine your state's homestead laws. You must request a homestead exemption and complete the application form to be eligible.
A mortgage on your homestead secured by the property is specifically exempt from homestead laws. You received the mortgage with the property as collateral, and the lender can foreclose on the mortgage regardless of a homestead exemption. The exemption also excludes property taxes and liens incurred prior to the homestead declaration. Credit card companies and businesses holding unsecured loans cannot place a lien on your homestead if you have a homestead exemption in place.
Avoid some state property taxes with the homestead exemption if you qualify. All 50 states have laws establishing a homestead exemption or a break from property taxes for senior citizens, according to the Retirement Living Information Center. Louisiana provides a $75,000 exemption for homestead property. The Kansas homestead law requires income of less than $30,800 as well as a second qualifying element, such as disability, blindness, over 55 or children under age 18. The homestead exemption is usually a partial exemption from taxation and does not avoid state and local taxation entirely.
Application for Homestead Exemption
Request information from your state if you own your home and reside on the property. You may qualify for a homestead exemption. Complete the form and return it to the county or state office to invoke your homestead exemption to protect your property and reduce your property tax liability. Some states such as Nevada require recording the homestead exemption with the county clerk or recorder. Once the exemption is in place, some states allow you to leave the residence temporarily and continue the homestead exemption so long as the departure is temporary and you do not establish another residence.
- Photos.com/AbleStock.com/Getty Images