Homeowners

Calling All Homeowners: How a Homestead Tax Exemption May Save You Money

It may seem like the price of just about everything is going up right now. But there may be ways homeowners can cut costs, especially on their property taxes.

The specifics vary from state to state, but a homestead tax exemption could potentially save you hundreds, or even thousands, of dollars each year on your property taxes. Who doesn’t like to save money?

These exemptions lower the taxable value of a home, giving homeowners a bit of a financial break.

“Homestead exemptions are the most widely available type of property tax relief,” said Adam Langley, associate director of tax policy at the Lincoln Institute of Land Policy in Cambridge, Mass. “In terms of obtaining this benefit, in most cases, it’s a fairly simple process.”

Whether you’re in the market to move to a new home, are a first-time homebuyer, or a long-term homeowner, taking the time to learn about homestead tax exemptions to see if you qualify could pay off.

Here’s what to know about how these exemptions work, if you’re eligible, and how to apply.

What is a homestead tax exemption?

Homestead exemptions are legal policies that lower the taxable value of a primary residence. So, you can’t claim this on a vacation or investment property. This can result in a lower tax bill.  

Exemptions are typically offered at the state level, though they’re sometimes offered at the local level.

Lower bills can help with already stretched budgets. The typical household spent about $2,459 in 2024 on property taxes, according to World Population Review.

However, property taxes vary from state to state and even county to county. In some places, homeowners may only pay a few hundred dollars a year, while in others, folks may be spending well over $10,000.

“Property taxes are not going to be a small portion of your housing budget in most states,” said Robert Strauss, an economics and public policy professor at Carnegie Mellon University in Pittsburgh.

Who qualifies for a homestead tax exemption?

Homestead exemptions aren’t always given out automatically when you buy a house or a condo. Often, you need to apply for them.

Rules vary from state to state, but the two main criteria are that you own the home, and that it is your primary residence. Another common stipulation is that you’ve owned the home for at least 12 months, although not all states require this.

Rental, investment properties, and vacation homes don’t qualify. Neither do commercial properties.

Additionally, some states offer additional exemptions for certain homeowners.

Senior citizens, veterans and active-duty military personnel, those with certain disabilities, and surviving spouses of service members or first responders may be eligible for higher savings.

How much can you save with a homestead exemption?

There’s no cut-and-dry amount for how much these exemptions will save you, as every state is different. Some exemptions are a flat rate. Others offer a percentage-based reduction of the assessed value.

Here are a few examples:

• In Florida, the homestead exemption can reduce your home’s taxable value by up to $50,000.
• In Texas, the standard exemption is $100,000 off the appraised value for school district taxes. So, for example, if your home has a market value of $300,000, you’d pay school taxes as if it was worth $200,000 instead.
• In Indiana, the size of the deduction is the lesser of 60% of the assessed value of the real property or $48,000.
• In Maine, the exemption is up to $25,000 of market value.

How do you apply for a homestead exemption?

Most states or local municipalities have an application deadline or a brief window in which they’re reviewing applications. Be sure to note if you must reapply every year or not.

Generally, you will need to fill out an application. You’ll also need to have documentation to prove the property is your primary residence and you are its owner.

Typically, you can find applications online in the tax assessment portion of your state, county, or local government website. You can also request one from your local tax assessment office.

Here’s a sampling of the information you may need to provide:

• Proof of residency, such government-issued driver’s license or REAL ID, utility bill, voter registration card, local or federal income tax return
• Your Social Security number
• Property parcel number (found on your property tax bill or provided by your local tax assessment office)
• If you claim part of your residence as a home office on your federal income tax return, you may need to state the percentage of your home that is used for business

Can you lose your homestead exemption?

Homestead tax exemptions aren’t guaranteed forever. If you sell the home or use it as a second home, you may lose the exemption. You may also forfeit the tax break if you move out of your home, transfer the deed to someone else, or rent out your home. 

In most places, you won’t need to reapply unless changes to your deed are made, such as if you refinance your mortgage or add a co-owner. You wouldn’t necessarily lose the exemption in those cases, but you’d have to let your local tax office know about these changes so they can reevaluate your exemption.

Failure to do so could result in penalties and fines.

Where can you find more information about your state’s homestead laws?

Homeowners can learn more about the various homestead exemptions they may be eligible for on their local tax assessor’s office or state tax websites. These typically provide more details about your state’s laws, eligibility criteria, and application requirements.

In addition, your real estate agent, loan officer, or tax professional can also help provide specifics about your location.

Many homeowners already take advantage of homestead exemptions, but new homeowners may be less familiar with them.

“It’s possible that someone is unwittingly leaving money on the table and paying more taxes than they need to,” said Langley.