Homestead Exemptions Laws
- Homestead acts allow homeowners in some states to keep their homes even in bankruptcy.house image by Dragomir Rafajlovic from Fotolia.com
Homestead laws generally protect a homeowner's home from foreclosure or seizure by creditors. In addition, many states provide homestead exemption for property taxes, county taxes, and for elderly homeowners. Homestead rules vary greatly from state to state in the scope, amount and nature of protection provided. Failure to comply with applicable state provisions will terminate rights under a homestead act. - States differ in the size of a claimed homestead. In addition, within the specific state, homestead size can differ based upon location. For example, South Dakota homesteads may only be one acre if within a town plat, but up to 160 acres if outside a town plat. Texas homestead act allows up to 10 acres for a urban homestead, with rural homesteads up to 200 acres under Texas Property Code Section 41.002(b).
- States vary with the value of a homestead exemption. Washington state provides for a $125,000 exemption, even in bankruptcy, whereas Florida places no limits on the value of the homestead. In addition, states may exempt commercial or business assets located on the property from protection, restricting applicability only to the residential portion.
- Homestead Acts generally only provide protection to the primary residence, not to secondary homes or to business properties. In addition, some states such as South Dakota do not allow even a primary residence to shelter minerals or mining equipment under a Homestead Act. The principal residence may be a condominium or mobile home, though some states do have filing or registration requirements in order to qualify a manufactured home.
- Many states provide for property tax relief under a homestead exemption. For instance, Florida allows the permanent residence to qualify for an exemption reducing taxable value of the property by up to $50,000. Other states are far less generous, such as Georgia, which grants a $2,000 exemption from property taxes, deducted from 40 percent of the assessed value of the claimed homestead.
- While Homestead Acts can protect a homeowner from unsecured debts, generally speaking Homestead Acts are not absolute shields from financial liability. Such acts do not protect the homeowner from a second mortgage on the property, or a home equity loan or line of credit drawn on the property. In addition, government debts such as taxes, assessments, debts to the government and even child and spousal support debts take priority. Finally, bankruptcy laws may or may not recognize homestead act limitation.
