What is homestead tax credit?


Quick Answer

A homestead tax credit provides property tax relief to homeowners who meet certain qualifications, states About.com. Although homestead tax credits vary from state to state, most require that the homestead be the principal residence of the property owner, and it must be occupied by the homeowner for a specified time frame.

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Full Answer

Some states such as Maine and Florida calculate homestead tax credit by reducing a homeowner's assessment by a fixed dollar amount established by the state, according to About.com. Other states calculate the homestead tax credit as a percentage. For example, if a house is assessed at $350,000, and the state has a 10 percent homestead tax credit, the homeowner only pays taxes on an assessed value of $315,000.

Other states such as Maryland use the homestead credit to protect homeowners from rising home values, reports About.com. Even if the value of a home increases by 30 percent, the owners pay no more than a 10 percent increase in their property taxes. Michigan bases its homeowner tax credit on a combination of home value and household income.

California is unique in that it has a homeowner exemption similar to the homestead tax credits in many other states, but it also has a homestead exemption intended to protect homeowners from losing their homes to creditors, explains Hall, Bishop & Hall, LLC.

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