Homestead exemptions lower taxes by reducing the taxable value of a homestead property, explains Harris County Appraisal District of Texas. For example, if a homestead is worth $100,000 but the exemption is $20,000, the owner only pays property tax on $80,000.Continue Reading
Homestead exemptions vary from state to state, but in Texas, any taxing unit, including school districts and city and county governments, can offer homestead exemptions, according to HCAD. In Texas, the exemptions are usually expressed as percentages. Exemptions cannot exceed 20 percent, but they cannot be less than $5,000. For example, if a homestead exemption is worth 10 percent of a property's value and the homestead is worth $40,000, the exemption is $5,000 rather than $4,000.
Certain states such as Maine require homesteaders to live on their properties for at least 12 months before claiming homestead exemptions, according to the Department of Administrative and Financial Services of the Maine Revenue Service.
In a Chapter 7 bankruptcy, the phrase "homestead exemption" refers to the fact that the equity of a primary home is protected in the bankruptcy, explains Nolo. The amount of protected equity that does not have to be turned over to the bankrupt person's creditors varies from state to state.Learn more about Taxes