When you own and use a home as a principal residence, you have a homestead. This status allows you certain benefits when calculating property taxes; in some states, it also affords your property legal protections from seizure. To claim a homestead in many states, however, you have to first declare it.
In general, state income tax laws define principal residence as the place an individual considers home. Temporary lodgings or vacation properties don't qualify, and you may not declare more than one principal residence in a state or a second principal residence in a different state. A declaration of homestead is a short form that simply gives your name and physical address and includes a statement locating your principal residence.
When completing the document, you may also need to affirm your age or other attributes if state law allows for special property tax provisions. In Massachusetts, for example, the Declaration of Homestead asks if you are 62 or older, disabled, in the armed services, or married to an occupant who is not an owner. In California, an automatic homestead exemption applies to debtors who have lived in a home continuously after a lien is filed; it protects the home from seizure for the lien up to a specific exemption amount. No declaration of homestead is required.
Recording the Declaration
State law may require that a homeowner have the declaration recorded, or officially filed with a court or public agency. This can generally be done by mail or in person, and it might require the payment of a fee. Nevada, for example, requires payment of a $17 fee for recording a single-page declaration of homestead and $1 for each additional page. If you wish to cancel the homestead declaration, you need to file a declaration of abandonment, which takes effect on the day it is signed and notarized.
Exemptions and Taxes
Many states allow a portion of the assessed value of homesteaded property to be exempt from taxation. This reduces the value of the residence for the purpose of calculating property tax. There may also be local exemptions, as well as special exemptions for the elderly, veterans and the disabled. In Cobb County, Georgia, a homestead benefits from an exemption of $10,000 for county general taxes and school taxes, along with an exemption of $2,000 in state property tax assessments. In Vermont, the tax law grants homesteaded properties an adjustment in property taxes of up to $8,000, but this benefit is not available to households with $109,000 or more in annual income.
Protection From Creditors
The state may protect homesteads, or a portion of their value, from seizure by creditors, including claims in bankruptcy. Nevada exempts $550,000 in equity in a homesteaded property from the owner's creditors, for example, but this does not prevent creditors from filing liens against the property or forcing a sale if the owner has more than $550,000 in equity. A homesteaded property can also be foreclosed for debts for which it serves as security, such as a mortgage.