The Homestead Tax Exemption is a legal benefit available in most states, which reduces property tax reduction on homeowners’ primary residence and protection from creditors following the death of a spouse or declaration of bankruptcy. The exemption can only be applied to your primary residence, and while some states offer it to every homeowner, others have specific requirements that must be met, which vary from state to state. Some of these are the value of your home, income level, age, whether or not you are a veteran, or if the individual has a disability. In some states, the exemption is automatically applied, while in others, you must apply.
In this article, we will look at the benefits of the exemption, the qualifying criteria, and how to apply for it.
Benefits
There are two benefits for the Homestead Tax Exception that we will dive into each individually and give an example of how the exemption benefits you.
Property Tax Reduction
The main benefit of the Homestead Exemption is reducing the property taxes owed on the homeowner's primary residence. For example, if your home is valued at $200,000 and your state’s property taxes are based on your home’s assessed value with an assessment ratio of 35%, your home's assessed value would be $70,000. With a 1.5% tax rate, you would pay $1,050 in property taxes.
In this example, we will say you are eligible for a $50,000 deduction. After applying for the Homestead Exemption, your home's assessed value would now be $52,500 ($150,000 x 35%). With the same 1.5% tax rate, your property taxes would now be reduced to $787.50.
That is a $262.50 yearly savings.
Protection from Creditors
Another benefit of the Homestead Exemption is protection from unsecured creditors. This only applies to the equity in your home, not the home's assessed value. There is also a limit to how much equity you can have in your home, typically around $40,000 in most states.
Requirements Example
As mentioned, eligibility requirements vary from state to state. In Ohio, applicants must be at least 65 years old on January 1st in the year they are applying or be permanently disabled, in which case age would not be a factor. There is also a limit on total household income. For 2024, the limit is $40,500, including all sources such as wages, pensions, and social security.
How to Apply
The form to apply is called the “Homestead Exemption Application (Form DTE 105A)”. Most counties will have a downloadable application on the county auditor’s website, or you can pick up a physical form from their office. In addition to your basic information, you will need to provide all of the following that apply to you:
Proof of age (e.g., a birth certificate or driver’s license)
Proof of disability (e.g., a statement from a medical professional if applying based on disability)
Income verification (e.g., tax returns, W-2s, Social Security statements)
Veterans’ documentation (e.g., VA disability certification)
Once completed, you can submit the form to your county auditor’s office in person or online (if they allow it). After submitting, you will also want to check if you must reapply each year or if they automatically apply it once accepted.
Conclusion
If you are unsure or think you may qualify for the Homestead Exemption, contact your financial advisor to start the conversation. If you do not have a financial advisor, we have a team at Whitaker-Myers Wealth Managers with the heart of a teacher who can help explain how this could benefit you. Along with a CPA on staff, you have a team to answer any of your questions and help you apply if you qualify.