When I bought my first home twenty years ago, “Make sure you ‘homestead your house’ before the end of the year!” was advice I heard over and over. Having only been a renter up to that time, I didn’t know what a homestead was or why I’d want to do this. Now I know that a homestead is basically one’s primary residence and that there are property tax savings to be had here.
The homestead exclusion makes a primary residence a little more affordable by giving you a discount on your property taxes. The property tax statement you get each year for a homestead should have a taxable market value amount and a homestead exclusion amount. Simply deduct the homestead exclusion amount from the taxable market value and that’s what you pay taxes on. It’s easy to see how this will reduce your taxes. This exclusion is only for a primary home (the “homestead”). With a second home or investment property, there is no such exclusion and you’ll pay taxes on the full taxable market value.
Generally, the more the home is worth, the smaller the exclusion will likely be but the savings can still be significant. Beyond a taxable market value of $517,000, there is no exclusion. These days you can just go to your county’s website and submit the application there. If you purchased a primary residence this year, you’ll have to apply for your homestead status before December is over. Once you have homestead status, you shouldn’t need to do anything in subsequent years unless your circumstances change.
