Homestead exemption

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Homestead exemption is a legal regime designed to protect the value of the homes of residents from property taxes, creditors, and circumstances arising from the death of the homeowner spouse. Laws are found in state statutes or constitutional provisions which exist in many states in the United States. The homestead exemption in certain southern states has its legal origins in colonial Spanish exemption laws. Exemption laws in other states were enacted in response to the effects of economic depressions in the nineteenth century.

Features

Homestead exemption laws typically have four primary features:

1. They prevent the forced sale of a home to meet the demands of creditors (however, in most cases homestead exemptions do not apply to forced sales to satisfy mortgages, mechanics liens, or sales to pay property taxes);
2. They provide the surviving spouse with shelter;
3. They provide an exemption from property taxes which can be applied to a home.
4. Allows a tax-exempt homeowner to vote on property tax increases to homeowners over the threshold via bond or millage requests.

For purposes of these statutes, a homestead is the one primary residence of a person, and no other exemption can be claimed on any other property anywhere, even outside the boundaries of the jurisdiction where the exemption is claimed.

In some states, homestead protection is automatic. In many states, however, the homeowner must file a claim for homestead exemption with the state, and will not receive the protections of the law until this has been done. Furthermore, the protection can be lost if the homeowner abandons the protected property by taking up primary residence elsewhere.

Immunity from forced sale

Different jurisdictions provide different degrees of protection under homestead exemption laws. Some only protect property up to a certain value, while others are limited by acreage limitations. If homesteads exceeds these limits creditors may still force the sale while the homesteader may keep a certain amount of the proceeds of the sale.

California - Protects up to $75,000 for single people, $100,000 for married couples, and $175,000 for people over 65 or legally disabled.

Texas, Florida, Iowa, South Dakota, Kansas, and Oklahoma have some of the broadest homestead protections in the U.S., in terms of the value of property that can be protected.

Texas's homestead exemption has no dollar value limit and has a 10 acres (4.0 hectares) exemption limit for homesteads inside of a municipality (urban homestead) and 100 acres (40 hectares) for those outside of a municipality (rural homestead). The rural acre allotment is doubled for a family: 200 acres (81 hectares) can be shielded from creditors in Texas for a rural homestead.

Both the Kansas and Oklahoma exemptions protect 160 acres (65 hectares) of land of any value outside of a municipality's corporate limits and 1 acre (0.40 hectares) of land of any value within a municipality's corporate limits. Most homestead exemptions cover the land including fixtures and improvements to it, such as buildings, timber, and landscaping.

New Mexico has a $60,000 exemption. Alaska has a $54,000 exemption.

Colorado has a $60,000 exemption, or $90,000 if you are over age 60 or disabled.

In the majority of states, the real dollar value of "protection" provided by these laws has diminished as exemption dollar amounts are seldom adjusted for inflation. The protective intent of such laws, with some notable exceptions stated above, has been eroded in most states.

Property tax exemption

A homestead exemption is most often only on a fixed monetary amount, such as the first 50,000 dollars of the assessed value. The remainder is taxed at the normal rate. In this case, a home valued at 150,000 would then only be taxed on 100,000; a home valued at 75,000 would only be taxed on 25,000.

The exemption is generally intended to make the property tax a progressive tax. In some places, the exemption is paid for with a local or state (or equivalent unit) sales tax.

The homestead exemption sales tax (HEST) in some places has been criticized for not exempting groceries, thus the poor end up paying some of their food money to subsidize those who can already afford their own homes.^{[citation needed]} Since the poor typically rent, neither they nor their landlords get an exemption.

Examples

• California - Exempts the first $7,000 of residential homestead from property taxes.
• Boulder, Colorado - Allows a 50% deduction for up to the first $200,000 (so $100,000 exemption) for seniors (over age 65) who have lived in their property for ten consecutive years.
• Georgia - Allows a 1% HEST, but it is only done in a few counties. None exempt groceries, but all must exempt prescription drugs.
• Florida - The Florida homestead exemption allows a $25,000 exemption for all taxes for the value of property which is assessed a property tax plus a $25,000 exemption on all taxes except school millage. Furthermore, increases in assessment shall not exceed the lower of: a) 3% of assessed value from prior year; or b) percentage change in CPI.
• Louisiana - Exempts the first $75,000^{[citation needed]} of residential homestead from local property taxes.
• Michigan - Exempts the homeowner from paying the operating millage of local school districts.
• Mississippi - Exemption is from all ad valorem taxes assessed to property, limited to the first $7,500 of assessed value, and limited to $300 of actual exempted tax dollars
• New York - The School TAx Relief (STAR) program exempts the first $30,000 of a primary home's assessed value from property taxes; the exemption is limited to homes valued under $500,000. Additional exemptions are available for people over 65 with limited income. The STAR program only applies to school taxes; no homestead exemption exists for taxes levied by other municipal entities.
• Oklahoma - Allows a $1000 deduction of the assessed valuation if owners file for homestead exemption with the local county clerk. This is about $75 to $125 of savings per year.
• Rhode Island- Exempts the first 20% of home value from property taxes.
• Texas - Allows a deduction equal to 20% of house value. Additional exemptions are available for county taxes, people over 65 and people who are disabled.

This list is incomplete; you can help by expanding it.

Other States, follow the link: http://www.lawchek.net/resources/forms/que/homestead.htm

References

• Combs, Susan. Texas Property Tax Code 2006 Edition Retrieved 22 May 2007.

External links

• Window on State Government - Exemptions (Texas)
• Use Online Property Tax Calculator for Estimating Value of Property Tax