Homestead exemption

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The homestead exemption is a legal regime designed to protect the value of the homes of residents from property taxes, creditors, and circumstances arising from the death of the homeowner spouse. Laws are found in state statutes or constitutional provisions which exist in many states in the United States. The homestead exemption in certain southern states has its legal origins in colonial Spanish exemption laws. Exemption laws in other states were enacted in response to the effects of economic depressions in the 19th century.

Features[edit]

Homestead exemption laws typically have four primary features:

  1. They prevent the forced sale of a home to meet the demands of creditors (however, in most cases homestead exemptions do not apply to forced sales to satisfy mortgages, mechanics liens, or sales to pay property taxes);
  2. They provide the surviving spouse with shelter;
  3. They provide an exemption from property taxes which can be applied to a home.
  4. Allows a tax-exempt homeowner to vote on property tax increases to homeowners over the threshold via bond or millage requests.

For purposes of these statutes, a homestead is the one primary residence of a person, and no other exemption can be claimed on any other property anywhere, even outside the boundaries of the jurisdiction where the exemption is claimed.

In some states, homestead protection is automatic. In many states, however, homeowner will not receive the protections of the law until they file a claim for homestead exemption with the state. Furthermore, the protection can be lost if the homeowner abandons the protected property by taking up primary residence elsewhere.

Immunity from forced sale[edit]

Different jurisdictions provide different degrees of protection under homestead exemption laws. Some only protect property up to a certain value, while others are limited by acreage limitations. If homesteads exceeds these limits creditors may still force the sale while the homesteader may keep a certain amount of the proceeds of the sale.

California protects up to $75,000 for single people, $100,000 for married couples, and $175,000 for people over 65 or legally disabled.

Texas, Florida, Iowa, South Dakota, Kansas, and Oklahoma have some of the broadest homestead protections in the US, in terms of the value of property that can be protected.

Texas's homestead exemption has no dollar value limit and has a 10 acres (4.0 hectares) exemption limit for homesteads inside of a municipality (urban homestead) and 100 acres (40 hectares) for those outside of a municipality (rural homestead). The rural acre allotment is doubled for a family: 200 acres (81 hectares) can be shielded from creditors in Texas for a rural homestead.[1]

Both the Kansas and Oklahoma exemptions protect 160 acres (65 hectares) of land of any value outside of a municipality's corporate limits and 1 acre (0.40 hectares) of land of any value within a municipality's corporate limits. Most homestead exemptions cover the land including fixtures and improvements to it, such as buildings, timber, and landscaping.

New Mexico has a $60,000 exemption.[2] Alaska has a $54,000 exemption.

Colorado has a $60,000 exemption, or $90,000 for people who are over 60 or disabled.[3]

In the majority of states, the real dollar value of "protection" provided by these laws has diminished as exemption dollar amounts are seldom adjusted for inflation. The protective intent of such laws, with some notable exceptions stated above, has been eroded in most states.

Criticism[edit]

The homestead exemption sales tax (HEST) has been criticized in some places for not exempting groceries; thus, the poor end up paying some of their food money to subsidize those who can already afford their own homes.[citation needed] Since the poor typically rent, neither they nor their landlords get an exemption.

Criticism of homestead exemptions in the uncited statement above, ignores the fact that groceries and consumables are generally exempt from sales tax. Homestead exemptions should not be confused with local sales tax, which all consumers typically pay. Recipients of food programs such as WIC do not pay tax when using the vouchers or debit-type cards issed through many states.[4] Moreover it is property owners who in fact subsidize the majority of local and state programs: "Property taxes are local taxes that provide the largest source of money local governments use to pay for schools, streets, roads, police, fire protection and many other services."[5]

Property tax exemption[edit]

A homestead exemption is most often only on a fixed monetary amount, such as the first $50,000 of the assessed value. The remainder is taxed at the normal rate. In that case, a home valued at $150,000 would then only be taxed on $100,000; a home valued at $75,000 would be taxed only on $25,000.

The exemption is generally intended to make the property tax a progressive tax. In some places, the exemption is paid for with a local or state (or equivalent unit) sales tax.

Examples[edit]

Links[edit]

Notes[edit]

  1. ^ Beyer, Gerry W.; Katharine L. Smith & Jennifer A. Owens (2010). "The Basics of Texas Homestead Law". Gerry W. Beyer, Texas Tech University School of Law, www.professorbeyer.com. Retrieved January 6, 2011. 
  2. ^ See NMSA 1978, Section 42-10-9.
  3. ^ See CRSA 38-41-201.
  4. ^ http://www.fns.usda.gov/wic/about-wic-wic-glance
  5. ^ http://window.texas.gov/taxinfo/proptax/ptax5.html
  6. ^ http://dor.myflorida.com/dor/property/limitations.html
  7. ^ MS Louisiana Tax Commission
  8. ^ MS Dept. of Revenue - Homestead Exemption Rules and Regulations
  9. ^ Combs, Texas Property Tax Code 2006 Edition, Sec. 11.13 - Residence Homestead
  10. ^ [1]

References[edit]

External links[edit]