Qualifying Persons for the Homestead Exemption

Homestead exemptions may protect your house from creditors in bankruptcy.

The right to stay in your home has been protected by various homestead exemptions since the late 1800s. Despite well-meaning legislative intentions, the laws vary from state to state and often are sufficiently complicated that people fail to claim the exemptions. Homestead exemptions in most states protect your home in two ways. They offer certain residents property tax relief on their primary home, and they may protect a resident's home from creditors in the event of bankruptcy. Variations in the details of the available exemptions exist at the federal, state and local levels, so make sure to consult a tax office or an attorney if you are unsure about your eligibility.

Primary Residence

The intent of both property tax and bankruptcy homestead exemptions is to protect you from losing your home. As such, you can claim a homestead exemption only on your primary residence. Each state and county determines "primary" differently, so read the details of the specific law you are using before attempting to take an exemption. Most exemptions require that your voter registration, car registration and federal tax returns match your homestead address, and some states, such as Florida, will void your exemption if you rent your property out even for brief periods of time.

Property Tax Reduction

Many municipalities offer a property tax homestead exemption for certain residents. Qualifying individuals most often include senior citizens, widows or widowers, disabled people and military veterans. If you are eligible for the exemption, you will receive a credit that lowers the taxable value of your home and therefore reduces the amount owed. The value of these exemptions depends on which category you qualify for and the state in which you live. For example, in Ohio you can reduce the taxable amount of your home if you are over age 65 or a surviving spouse over 59.

Bankruptcy Protection

You may be able to use a homestead exemption to protect your house in the event of bankruptcy. States offer different levels of protection. For example, in Florida, your primary residence is entirely protected as long as your home is under half an acre in a municipality or under 160 acres elsewhere, but Pennsylvania offers no homestead protection. In the event you do not qualify for state homestead exemptions, federal provisions may protect your home, provided your equity does not exceed the maximum amount allowed and your state bankruptcy laws do not bar federal protections.

Surviving Spouse

In most states, homestead exemptions protect surviving spouses. Should your spouse's will designate another person to inherit your house, the homestead exemption in most states protects you and defers the inheritance for as long as you continue to occupy the house. An attorney can advise you about the details of this protection in your specific situation.

References

• The New York Times: Home is Where the Tax Exemption Is
• Legal Consumer: 50 State Homestead Exemptions and Other Bankruptcy Exemptions
• U.S. Legal Forms: Homestead Exemptions and Forms
• Marin County, Florida, Property Appraiser's Office: Homestead Exemption
• Ohio Department of Taxation: Homestead Exemption