A Complete Guide to State Homestead Tax Exemption in 2024

If you own a homestead, chances are you’ve benefited from a reduced tax burden over the years under the state exemption statutes. In 2023, several states, including Texas, Indiana and Kentucky, enacted changes to their homestead tax exemption regulations. 

This comprehensive guide covers everything you need to know about these adjustments, including how they might affect your tax bill in 2024. 

Understanding the Homestead Tax Exemption

A tax exemption essentially lowers the amount of property tax that you have to pay on your home. This deduction can come as a specific dollar amount or a percentage of the property value, which is then excluded when calculating your tax obligation for the year. 

In most states, this provision can also protect homeowners from losing their property to creditors during economic hardship or the death of a spouse, thereby providing tax relief and shelter protection. 

The exact rules and amounts vary wildly by state. For example, Nevada’s homestead law automatically protects the first $550,000 of equity in your home, meaning if you have less than $550,000 home equity, your property cannot be sold to pay off creditors. If the home equity exceeds $550,000 and the property is sold, you’re entitled to keep the first $550,000.

Notable State Homestead Tax Exemption Changes for 2024

The year 2023 saw a number of adjustments to the provisions regarding property tax and exemption applications across multiple states.

Texas

In November 2023, over 83% of voters voted in favor of Proposition 4, a bill intended to raise the homestead exemption amount from $40,000 to $100,000. The proposition aimed to lower school district property taxes, which comprise the bulk of the property tax bill for Texas landowners. 

These changes became effective on January 1, 2024, so if you have a homestead exemption in the state, you’ll pay less tax this year. The bill also includes a provision to protect homeowners aged 65 and above from being priced out of their homes.

Indiana

The state of Indiana passed a similar resolution under House Bill 1499, fixing the standard deduction at $48,000 and raising the supplemental homestead deduction from 35% to 40% in 2024. 

The supplemental deduction applies to the property’s net assessed value after the standard deduction has been used. A higher supplemental deduction reduces the taxable homestead set value, resulting in a lower tax amount. 

Kentucky

The Department of Revenue set the maximum homestead exemption amount at $46,350 for the 2024 tax period. This represents an increase of $5,850 from the amounts applicable over the 2021–2022 period. In other words, you can deduct as much as $46,350 from your property’s assessed value when calculating your tax obligation for the year. 

South Carolina 

The state General Assembly is currently considering a bill to raise the homestead exemption amount from $50,000 to $100,000 of the property’s fair market value. However, this will only apply to homeowners over 65 years old, disabled or legally blind. 

The bill was first introduced in January 2023 and deliberations remain ongoing, with significant progress expected in 2024. 

Wisconsin and Colorado 

Both states recently passed new property tax regulations that might impact homestead exemptions. In Wisconsin, the government has abolished personal property tax effective January 2024. This means owners of exempt personal properties will not receive a tax assessment or bill this year. 

In Colorado, the governor signed legislation lowering the residential property tax assessment rate from 6.765% to 6.7% for the 2024 fiscal year. 

If you’re a homesteader in these states, these changes may affect your tax obligations for the year. However, you’ll need to consult a tax professional to correctly interpret the provisions of these new legislations and ensure compliance. 

Do All Homes Qualify for Homestead Exemptions?

No. Generally speaking, qualifying for a homestead exemption requires you to meet certain requirements: 

• You must be a U.S. citizen
• You must own the property
• The property must be for residential purposes
• The property must be your primary residence, not a second home or investment asset
• You must be a resident of the state in which you apply for an exemption

Seniors aged 65 or older, veterans and people with disabilities may also qualify for homestead exemptions. 

Even if you don’t qualify for an exemption, homesteading provides several ways to generate additional income and reduce yearly expenditures. For example, you can use your homestead land to start a hatchery to sell eggs and raise poultry for meat. You could also rent out part of the land as a venue for events like weddings and reunions. 

What Are the Best States for Homestead Exemptions?

Florida, Kansas, Oklahoma, South Dakota and Iowa provide unlimited homestead exemption, making them the best states in that regard. However, these exemptions only apply to creditor-related concerns, not your tax liability. This means regardless of your home value, creditors cannot force you to sell your homestead for debt repayment in these states. 

On the flip side, Maryland, New Jersey and Pennsylvania provide no provision for homestead exemptions. 

How Do I Apply for a Homestead Tax Exemption?

Depending on where you live, you can apply online through the state treasury office or the designated tax assessor in your appraisal district. Some states might not accept online applications, so you’ll need to fill out the paperwork and mail it before the filing deadline. This date varies, but most states set a due date in March of the current tax year. 

If you already enjoy tax exemption as a homesteader, there’s usually no need to reapply yearly. However, many states require county appraisal districts to verify homestead exemptions on a rotating basis, so you might receive a correspondence asking you to renew your application. 

What a Homestead Tax Exemption Doesn’t Cover

There are limits to what your exemption can cover, varying by state. Generally, it cannot protect you from foreclosure due to not paying your property taxes or mortgage. 

Mechanic’s liens — payment owed to contractors for upgrading or fixing your property — are also outside the scope of homestead exemptions. Contact your county tax assessor’s office for questions about your state’s applicable regulations. 

Take Advantage of Homestead Tax Exemption in 2024

Homesteading has its perks, including reduced tax obligations and protection from creditors in the event of bankruptcy. Most states offer tax exemptions, but remember to research your state’s guidelines and application processes so you don’t miss out on these essential benefits in 2024.