What Is a Homeowners’ Exemption?

By Jennifer Hodorowicz

There are many expenses that come with being a homeowner. Aside from the down payment and monthly mortgage payments, you’ll need to plan for maintenance expenses, any upgrades you want to make to your home, and yearly insurance and property taxes. Fortunately for some, there’s a homeowners’ exemption that can reduce your annual property tax bill. 

Homeowners’ exemptions are dependent on your location, so be sure to check with your tax assessors’ office to see if you qualify where you live. Not only do exemptions vary state by state, they vary by counties and municipalities.

What is the homeowners’ exemption? 

The homeowners’ exemption, also referred to as a homestead exemption, is a deduction you can make on your tax rate for a portion of your property’s value that you don’t have to pay taxes on. 

Your home has an Assessed Value, which is a tax value of your home that’s filed with your county municipality. This is the amount that your annual property taxes are computed from. The Equalized Assessed Value (EAV) is the market value of your home, which is determined by looking at market trends and local home sales. This is where the homeowners’ exemption is helpful—the homeowners’ exemption reduces the EAV of your home, and subsequently reduces a percentage of your total tax bill.   

For example, in Cook County, Illinois, the county assessor determines the EAV and then uses 10 percent of its value for the Assessed Value. According to the Cook County Assessment office,

“The Equalized Assessed Value (EAV) is the partial value of your property. It is the figure on which your tax bill is calculated. Also note that exemptions are deducted from the EAV, which will likely lower your tax bill. The exemption amount is not the dollar amount by which your tax bill could be lowered.”

How does the homeowners’ exemption work?

As outlined above, the homeowners’ exemption works to reduce the EAV of your home to then reduce your yearly property taxes. The goal of the exemption is to protect resident homeowners from too great of an increase in property taxes annually by capping and restricting the amount that the taxable value of their homes can rise each year.

For example, in an area that attracts many new homeowners, the value of the homes will increase rapidly to keep up with supply versus demand. By reducing the EAV by 10 percent annually, homeowners aren’t forced from their homes and don’t have to pay an increase in property taxes they can no longer afford.

Who qualifies for the homeowners’ exemption? 

To qualify for the homeowners’ exemption, you must own and occupy your home as your primary residence, or principal place of residence, and you must be in your residence by the lien date (January 1) of the tax year you’re claiming the exemption. Some examples of primary residences that qualify include:  

  • Single-family residence 
  • Duplex or half-plex 
  • Condominium or planned unit development (PUD) 
  • Unit of any multi-unit property 
  • Mobile home 
  • Houseboat or floating home that’s subject to property tax

How to apply for the homeowners’ exemption 

Homeowner tax exemptions vary not only from state to state but from county to county, as well. To see if you qualify, contact the property tax authority for your area to see what exemptions are available in your location. To find the property tax authority, locate which county or municipality the deed to your home is registered with.  

If you qualify for an exemption, you must submit an application to the taxing authority. In many areas this submission is free, but there may be a small fee associated dependent on your location. Be sure to check the deadlines for application submission, as well. Some are required by the first day of the tax year, whereas others have an extended deadline.

Once you follow this process the first time, many counties will automatically renew your application for subsequent tax years if your home remains your primary residence. Notify the assessor if the owner no longer occupies the property, as you’ll be no longer eligible for the exemption. 

Additional tax exemptions for homeowners 

Just as every area has different rules and guidelines for homeowners’ exemptions, each area and state has special homeowners’ exemptions. For example, some areas offer exemptions for specific segments of the population based on veteran status, income, or age. Others have exemptions benefiting widows, clergy members, and good Samaritans, and can even be agriculture-related. Here are a few additional tax exemptions for homeowners:

  • Income-related exemptions—Homeowners with a total household income below a set amount may be eligible for an exemption to help reduce the taxes they owe. Certain areas require that you live in your home for a certain amount of time before being eligible for the exemption.
  • Homeowners’ tax exemptions for seniorsSenior citizens over 65 are often eligible for the homeowners’ tax exemptions. These exemptions can often be claimed on top of other exemptions, such as income-related and EVA exemptions. Be sure to check with your municipality for age and income requirements for eligibility.
  • Homeowners’ tax exemptions for veteransVeterans, particularly disabled veterans, receive property tax exemptions in every state in the U.S. Some states, such as Michigan, will waive all property taxes for disabled veterans, while other states will reduce the assessed value of a home by tens of thousands of dollars. What’s more: some states will also provide tax credits to disabled veterans. Check with your municipality and local VA office for help with these exemptions.
  • Exemptions for the disabledThose afflicted with disabilities often qualify for special exemptions depending on the state they live in. Be prepared to show evidence of your qualifying disability through social security disability benefits, and check with your local municipality to see what you may qualify for.

Filing a claim under the homeowners’ exemption 

If you live in an area where you qualify for a homeowners’ exemption, or you fall under the categories listed above, please contact your local assessor’s office to get the proper claim form. For most areas, you must submit the forms for the upcoming tax year by February 15 to claim the full exemption. If you file after February 15 but before December 10, you may only be eligible for 80 percent of the exemption for that tax year.

Frequently asked questions

Who qualifies for the homeowners’ property tax exemption?

Homeowners living in their primary residence as of January 1 of that tax year qualify for a homeowners’ property tax exemption.

When can I apply for a homeowners’ exemption?

You can apply for a homeowners’ exemption on the first day of tax season for that year.

Do I need to file a homeowners’ exemption every year?

Typically, you only need to file once and the application will renew annually. Check with your local assessor’s office to confirm.

When is the application deadline for filing homeowners’ exemptions?

Most locations have a February 15 deadline for that tax year, but this varies from state to state and will differ by municipality.

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