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Homestead Exemption

Definition - What does Homestead Exemption mean?

A homestead exemption is a form of tax credit that is automatically given to surviving spouses or other family members when a homeowner dies. If a married couple jointly owns a home, the surviving spouse can benefit from a reduced property tax rate when the other dies, because a homestead exemption automatically deducts a set amount from the value of a home before taxes are calculated. This is a progressive tax, so a property that holds less value pays less property tax through this assessment than a house that is valued considerably higher.

Justipedia explains Homestead Exemption

A homestead exemption tax is automatic throughout most of the United States. In those states where it is not automatic, all a person needs to do is apply for the status and it is provided. It is part of the federal income tax guidelines as well as part of probate and inheritance. This system has only been adopted in the United States and is available for any inheritor of property who holds a blood or familial tie to the deceased. A homestead exemption provides sizable savings and is proportionately worth more to homeowners of lower valued properties. This provides an opportunity for those that need to benefit from a lower tax rate; it gives them the opportunity to do so by acknowledging either that their circumstances have changed financially (through the loss of the homeowner or co-homeowner) or that the new family owners may not be in the same position to pay taxes on the value of the home as did the former homeowner.

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