Homestead Exemptions

Many homeowners have never heard the term "Homestead Exemption." There are three possible reasons for this. First, you live in a state that does not require an Exemption Declaration, such as Texas, meaning that your Homestead Exemption is automatic. Second, you might live in one of the small number of states that do not offer their residents the protection of a Homestead Exemption. Third, your real estate agent never told you to file one after you bought your home.

So what's the big deal?

In its broadest sense, a Homestead Exemption allows a homeowner to retain all or part of their home's value or acreage in the following circumstances:
Preventing the forced sale of a home to meet the demands of creditors;
Providing a surviving spouse with shelter;
Providing an exemption from property taxes.

The Homestead Exemption will NOT protect your home from a forced sale to cover mortgage debt or a mechanic's lien.

The terms of the Homestead Exemption, of course, vary widely from state to state. Florida and Texas are considered to have the most liberal Homestead Exemptions. Florida protects an unlimited value of a home, but limits that protection to a half-acre within a municipality. Rural properties in Florida are allowed much greater acreage. Texas also places no cap on value, and allows for a generous 10 acres within a municipality, 100 acres in a rural area, and 200 hundred acres for a family in a rural area.

Most states don't allow for such a broad application of Homestead Exemption. In those cases, if your home goes into a forced sale, a certain number of dollars or percentage of value will have to go to the homeowner, even if that reduces the amount of debt than can be paid back through the home sale. You are generally only allowed to have an exemption on one property, and it must be your primary residence.

Some states, counties, and even cities give their elderly, low-income, and disabled homeowners a property tax break via the Homestead Exemption. This can cap the dollar amount of property taxes, or allow for a certain dollar value (i.e. up to $75,000) to be non-taxable. This is especially helpful for those on a fixed income who may be living in an area undergoing tremendous growth or increase in property values.


Now for the necessary disclaimers: I am not a lawyer and do not work in real estate. This is the extent of what I know on this topic, from personal knowledge and culled from reference materials. Like all things in life, if you need a professional (such as a lawyer), by all means hire one and do not rely on this discussion forum for legal advice!!! I sincerely hope that readers will comment, expand, and expound on this topic.

More information on Homestead Exemptions can be found in the excellent Nolo Law series.