What Is Homestead Exemption?

A tax benefit that reduces the taxable value of a primary residence. Available in many states, though rules and amounts vary significantly.

Detailed Explanation

A homestead exemption reduces the portion of your home's value that is subject to property taxes. It only applies to your primary residence, meaning the home you actually live in. If you own rental properties or a vacation home, those do not qualify. The exemption works by subtracting a set dollar amount or percentage from your assessed value before your tax rate is applied. For example, if your home is assessed at $300,000 and you have a $50,000 homestead exemption, your taxable value drops to $250,000. The millage rate is then applied to $250,000 instead of $300,000. Many states also offer enhanced homestead exemptions for specific groups, including seniors (usually age 65+), disabled veterans, surviving spouses of military members, and low-income homeowners. These enhanced versions can significantly increase the exemption amount, sometimes eliminating the property tax bill entirely. The critical detail most homeowners miss: homestead exemptions are not automatic in most states. You must apply, and there is usually a deadline. If you bought your home and never filed for the exemption, you have been paying more than you need to. Contact your county assessor's office or check their website for the application form and deadline.

How It Varies by State

Texas$100,000 off assessed value

Mandatory $100,000 exemption for school district taxes. Additional $10,000 for seniors/disabled. No state income tax makes this exemption especially valuable.

FloridaUp to $50,000 off assessed value

First $25,000 applies to all taxes. Second $25,000 applies only to non-school taxes. Also includes Save Our Homes 3% annual cap on assessment increases.

GeorgiaVaries by county ($2,000-$50,000+)

Basic statewide exemption of $2,000 off assessed value. Many counties offer much higher local exemptions. Must apply through county tax commissioner.

Illinois$10,000 off equalized assessed value

Cook County: $10,000 reduction. Other counties: $6,000. Senior freeze available for qualifying homeowners aged 65+ with income under $65,000.

Common Misconceptions

Myth:The homestead exemption is applied automatically when you buy a home

Reality:In most states, you must file a separate application with your county. Some states allow online applications; others require paper forms. Missing the deadline means waiting another year.

Myth:The homestead exemption protects you from foreclosure

Reality:In property tax context, the homestead exemption only reduces your taxable value. Some states do have separate homestead protection laws regarding creditor claims, but that's a different legal concept.

Myth:If I have a homestead exemption, I don't need to appeal

Reality:The homestead exemption and a tax appeal address different problems. The exemption reduces your taxable base by a fixed amount. An appeal corrects an inaccurate assessed value. You can and should use both.

Impact on Your Tax Bill

In Texas, if your home is assessed at $400,000 and you have the $100,000 homestead exemption, your taxable value for school taxes drops to $300,000. At an average school district rate of 1.05%, that exemption saves you $1,050 per year. If you also successfully appeal to reduce your assessed value by $30,000 (to $370,000), your taxable value drops to $270,000, saving an additional $315 per year on school taxes alone.

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