Homestead exemption
Overview
 
Homestead exemption is a legal regime designed to protect the value of the homes of residents from property taxes, creditor
Creditor
A creditor is a party that has a claim to the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some property or service to the second party under the assumption that the second party will return an equivalent property or...

s, and circumstances arising from the death of the homeowner spouse. Laws are found in state
U.S. state
A U.S. state is any one of the 50 federated states of the United States of America that share sovereignty with the federal government. Because of this shared sovereignty, an American is a citizen both of the federal entity and of his or her state of domicile. Four states use the official title of...

 statutes or constitution
Constitution
A constitution is a set of fundamental principles or established precedents according to which a state or other organization is governed. These rules together make up, i.e. constitute, what the entity is...

al provisions which exist in many states in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

.
Homestead exemption laws typically have four primary features:
  1. They prevent the forced sale
    Forced sale
    A Forced Sale of Real Estate is an action that taken in a civil court forcing the owners to sell the property at issue and divide the profits. A forced sale would be the result of a petition to partition action.- Why forced sales occur :...

     of a home to meet the demands of creditor
    Creditor
    A creditor is a party that has a claim to the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some property or service to the second party under the assumption that the second party will return an equivalent property or...

    s (however, in most cases homestead exemptions do not apply to forced sales to satisfy mortgages, mechanics lien
    Mechanics lien
    A mechanic's lien is a security interest in the title to property for the benefit of those who have supplied labor or materials that improve the property. The lien exists for both real property and personal property. In the realm of real property, it is called by various names, including,...

    s, or sales to pay property taxes);
  2. They provide the surviving spouse with shelter;
  3. They provide an exemption from property tax
    Property tax
    A property tax is an ad valorem levy on the value of property that the owner is required to pay. The tax is levied by the governing authority of the jurisdiction in which the property is located; it may be paid to a national government, a federated state or a municipality...

    es which can be applied to a home
    Home
    A home is a place of residence or refuge. When it refers to a building, it is usually a place in which an individual or a family can rest and store personal property. Most modern-day households contain sanitary facilities and a means of preparing food. Animals have their own homes as well, either...

    .
  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
Primary residence
A person's primary residence is the dwelling where they usually live, typically a house or an apartment. A person can only have one primary residence at any given time, though they may share the residence with other people...

 of a person, and no other exemption can be claimed on any other property anywhere, even outside the boundaries of the jurisdiction
Jurisdiction
Jurisdiction is the practical authority granted to a formally constituted legal body or to a political leader to deal with and make pronouncements on legal matters and, by implication, to administer justice within a defined area of responsibility...

 where the exemption is claimed.

In some states, homestead protection is automatic.
Encyclopedia
Homestead exemption is a legal regime designed to protect the value of the homes of residents from property taxes, creditor
Creditor
A creditor is a party that has a claim to the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some property or service to the second party under the assumption that the second party will return an equivalent property or...

s, and circumstances arising from the death of the homeowner spouse. Laws are found in state
U.S. state
A U.S. state is any one of the 50 federated states of the United States of America that share sovereignty with the federal government. Because of this shared sovereignty, an American is a citizen both of the federal entity and of his or her state of domicile. Four states use the official title of...

 statutes or constitution
Constitution
A constitution is a set of fundamental principles or established precedents according to which a state or other organization is governed. These rules together make up, i.e. constitute, what the entity is...

al provisions which exist in many states in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

.

Features

Homestead exemption laws typically have four primary features:
  1. They prevent the forced sale
    Forced sale
    A Forced Sale of Real Estate is an action that taken in a civil court forcing the owners to sell the property at issue and divide the profits. A forced sale would be the result of a petition to partition action.- Why forced sales occur :...

     of a home to meet the demands of creditor
    Creditor
    A creditor is a party that has a claim to the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some property or service to the second party under the assumption that the second party will return an equivalent property or...

    s (however, in most cases homestead exemptions do not apply to forced sales to satisfy mortgages, mechanics lien
    Mechanics lien
    A mechanic's lien is a security interest in the title to property for the benefit of those who have supplied labor or materials that improve the property. The lien exists for both real property and personal property. In the realm of real property, it is called by various names, including,...

    s, or sales to pay property taxes);
  2. They provide the surviving spouse with shelter;
  3. They provide an exemption from property tax
    Property tax
    A property tax is an ad valorem levy on the value of property that the owner is required to pay. The tax is levied by the governing authority of the jurisdiction in which the property is located; it may be paid to a national government, a federated state or a municipality...

    es which can be applied to a home
    Home
    A home is a place of residence or refuge. When it refers to a building, it is usually a place in which an individual or a family can rest and store personal property. Most modern-day households contain sanitary facilities and a means of preparing food. Animals have their own homes as well, either...

    .
  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
Primary residence
A person's primary residence is the dwelling where they usually live, typically a house or an apartment. A person can only have one primary residence at any given time, though they may share the residence with other people...

 of a person, and no other exemption can be claimed on any other property anywhere, even outside the boundaries of the jurisdiction
Jurisdiction
Jurisdiction is the practical authority granted to a formally constituted legal body or to a political leader to deal with and make pronouncements on legal matters and, by implication, to administer justice within a defined area of responsibility...

 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
California
California is a state located on the West Coast of the United States. It is by far the most populous U.S. state, and the third-largest by land area...

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

Texas
Texas
Texas is the second largest U.S. state by both area and population, and the largest state by area in the contiguous United States.The name, based on the Caddo word "Tejas" meaning "friends" or "allies", was applied by the Spanish to the Caddo themselves and to the region of their settlement in...

, Florida
Florida
Florida is a state in the southeastern United States, located on the nation's Atlantic and Gulf coasts. It is bordered to the west by the Gulf of Mexico, to the north by Alabama and Georgia and to the east by the Atlantic Ocean. With a population of 18,801,310 as measured by the 2010 census, it...

, Iowa
Iowa
Iowa is a state located in the Midwestern United States, an area often referred to as the "American Heartland". It derives its name from the Ioway people, one of the many American Indian tribes that occupied the state at the time of European exploration. Iowa was a part of the French colony of New...

, Kansas
Kansas
Kansas is a US state located in the Midwestern United States. It is named after the Kansas River which flows through it, which in turn was named after the Kansa Native American tribe, which inhabited the area. The tribe's name is often said to mean "people of the wind" or "people of the south...

, and Oklahoma
Oklahoma
Oklahoma is a state located in the South Central region of the United States of America. With an estimated 3,751,351 residents as of the 2010 census and a land area of 68,667 square miles , Oklahoma is the 28th most populous and 20th-largest state...

 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 ha) exemption limit for homesteads inside of a municipality (urban homestead) and 100 acres (40.5 ha) for those outside of a municipality (rural homestead). The rural acre allotment is doubled for a family: 200 acres (80.9 ha) can be shielded from creditors in Texas for a rural homestead.

Both the Kansas and Oklahoma exemptions protect 160 acres (64.7 ha) of land of any value outside of a municipality's corporate limits and 1 acre (0.404686 ha) 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
New Mexico
New Mexico is a state located in the southwest and western regions of the United States. New Mexico is also usually considered one of the Mountain States. With a population density of 16 per square mile, New Mexico is the sixth-most sparsely inhabited U.S...

 has a $60,000 exemption. Alaska
Alaska
Alaska is the largest state in the United States by area. It is situated in the northwest extremity of the North American continent, with Canada to the east, the Arctic Ocean to the north, and the Pacific Ocean to the west and south, with Russia further west across the Bering Strait...

 has a $54,000 exemption.

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 dollar
Dollar
The dollar is the name of the official currency of many countries, including Australia, Belize, Canada, Ecuador, El Salvador, Hong Kong, New Zealand, Singapore, Taiwan, and the United States.-Etymology:...

s of the assessed value
Value (economics)
An economic value is the worth of a good or service as determined by the market.The economic value of a good or service has puzzled economists since the beginning of the discipline. First, economists tried to estimate the value of a good to an individual alone, and extend that definition to goods...

. 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
Progressive tax
A progressive tax is a tax by which the tax rate increases as the taxable base amount increases. "Progressive" describes a distribution effect on income or expenditure, referring to the way the rate progresses from low to high, where the average tax rate is less than the marginal tax rate...

. In some places, the exemption is paid for with a local or state (or equivalent unit) sales tax
Sales tax
A sales tax is a tax, usually paid by the consumer at the point of purchase, itemized separately from the base price, for certain goods and services. The tax amount is usually calculated by applying a percentage rate to the taxable price of a sale....

.

The homestead exemption sales tax (HEST) in some places has been criticized for not exempting groceries, thus the poor
Poor
Poor is an adjective related to a state of poverty, low quality or pity.People with the surname Poor:* Charles Henry Poor, a US Navy officer* Charles Lane Poor, an astronomer* Edward Erie Poor, a vice president of the National Park Bank...

 end up paying some of their food money to subsidize
Subsidy
A subsidy is an assistance paid to a business or economic sector. Most subsidies are made by the government to producers or distributors in an industry to prevent the decline of that industry or an increase in the prices of its products or simply to encourage it to hire more labor A subsidy (also...

 those who can already afford their own homes. Since the poor typically rent
Renting
Renting is an agreement where a payment is made for the temporary use of a good, service or property owned by another. A gross lease is when the tenant pays a flat rental amount and the landlord pays for all property charges regularly incurred by the ownership from landowners...

, neither they nor their landlord
Landlord
A landlord is the owner of a house, apartment, condominium, or real estate which is rented or leased to an individual or business, who is called a tenant . When a juristic person is in this position, the term landlord is used. Other terms include lessor and owner...

s get an exemption in return either, on the other hand the exemption for the elderly often means the difference between staying or being forced out of homes they worked all their lives for.

Examples

  • California
    California
    California is a state located on the West Coast of the United States. It is by far the most populous U.S. state, and the third-largest by land area...

     - Exempts the first $7,000 of residential homestead from property taxes.
  • Georgia
    Georgia (U.S. state)
    Georgia is a state located in the southeastern United States. It was established in 1732, the last of the original Thirteen Colonies. The state is named after King George II of Great Britain. Georgia was the fourth state to ratify the United States Constitution, on January 2, 1788...

     - Allows a 1% HEST, but it is only done in a few counties. None exempt groceries, but all must exempt prescription drug
    Prescription drug
    A prescription medication is a licensed medicine that is regulated by legislation to require a medical prescription before it can be obtained. The term is used to distinguish it from over-the-counter drugs which can be obtained without a prescription...

    s.
  • Oklahoma
    Oklahoma
    Oklahoma is a state located in the South Central region of the United States of America. With an estimated 3,751,351 residents as of the 2010 census and a land area of 68,667 square miles , Oklahoma is the 28th most populous and 20th-largest state...

     - 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.
  • Texas
    Texas
    Texas is the second largest U.S. state by both area and population, and the largest state by area in the contiguous United States.The name, based on the Caddo word "Tejas" meaning "friends" or "allies", was applied by the Spanish to the Caddo themselves and to the region of their settlement in...

     - Allows a deduction equal to 20% of house value. Additional exemptions are available for county taxes, people over 65 and people who are disabled.
  • Florida homestead exemption - Allows a $50,000 exemption for the value of property which is assessed a property tax. Furthermore, increases in assessment shall not exceed the lower of: a) 3% of assessed value from prior year; or b) percentage change in CPI.
  • Boulder, Colorado
    Boulder, Colorado
    Boulder is the county seat and most populous city of Boulder County and the 11th most populous city in the U.S. state of Colorado. Boulder is located at the base of the foothills of the Rocky Mountains at an elevation of...

     - 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.
  • Louisiana Homestead Exemption - Exempts the first $75,000 of residential homestead from local property taxes.
  • Rhode Island Homestead Exemption- Exempts the first 20% of home value from property taxes.
  • Michigan Principal Residence Exemption - Exempts the homeowner from paying the operating millage of local school districts.

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

External links

The source of this article is wikipedia, the free encyclopedia.  The text of this article is licensed under the GFDL.
 
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