A homestead declaration is a legal document that designates your primary residence as your "homestead," providing important protections against creditors and potentially significant property tax reductions. This powerful but often overlooked tool can be one of the most financially beneficial forms you'll ever file as a homeowner.
What Is a Homestead Declaration?
A homestead declaration is a formal statement filed with your county recorder's office to declare a property as your primary residence. Doing so notifies the government and creditors that the property is your home, not an investment or second residence.
These protections help homeowners safeguard their equity and lower their tax burden.
Benefits of Filing a Homestead Declaration
Protection From Creditors
One of the primary benefits of filing a homestead declaration is protection from unsecured creditors. It shields a portion of your home's value from certain creditors in case of bankruptcy, prevents forced sale of your home to satisfy judgments, and provides surviving spouses with continued protection if the primary or co-owner passes away.
The level of protection varies significantly by state. Some states, like Florida and Texas, offer unlimited value protection, while others cap the protected equity amount — often between $5,000 and $500,000.
Property Tax Reductions
In most states, filing a homestead declaration can lead to substantial property tax savings. It can reduce the assessed value of your property for tax purposes and may cap annual assessment increases. It also creates the potential for additional homestead exemptions, or tax breaks, for seniors, veterans, or people with disabilities and can save homeowners hundreds or even thousands of dollars annually.
Other Benefits
Beyond creditor protection and tax savings, homestead declarations may offer exemption from paying capital gains tax on home sales up to certain limits. Some jurisdictions offer probate avoidance. With a homestead declaration, you can protect your family home during difficult financial times.
Who Can File a Homestead Declaration?
To qualify for a homestead declaration, you typically must own the property and occupy it as your principal residence. Most states limit homestead declarations to your primary residence, meaning you cannot simultaneously declare multiple properties as homesteads.
You also need to be a legal resident of the state where the property is located. If you’re interested in filing a homestead declaration, you must file the appropriate paperwork with your county.
How To File a Homestead Declaration
The process for filing a homestead declaration varies by location but generally follows these steps:
Obtain the correct homestead declaration form from your county recorder's office or website.
Complete the form with personal information, property description, and legal details (such as property tax ID number, legal property description, deed information, and date of acquisition).
Have the document notarized. Most counties require notarization to validate the declaration.
File the declaration with your county recorder's office. This typically involves paying a nominal filing fee.
Retain proof of filing for your records and tax preparation.
In some states, the homestead exemption is automatically applied when you purchase a home; in others, you must proactively apply. It's crucial to check your local requirements, as procedures vary significantly.
In many states, if you qualify for various homestead exemptions but haven’t applied, you can retroactively apply for up to two or three years. Note that it often requires more paperwork.
At Ownwell, we can help you retroactively apply for these exemptions.
Limitations and Considerations
While homestead declarations offer valuable benefits, they come with important limitations.
Protection applies only to your primary residence, not investment properties.
The amount of equity protected from creditors varies widely by state.
Homestead protections typically don't apply to secured debts like mortgages, home equity loans, or property tax liens.
Some states require renewal of the declaration periodically. Ownwell offers homestead exemption monitoring!
You must refile if you move to a new primary residence in some jurisdictions.
Homestead declarations don't prevent foreclosure if you fail to pay your mortgage.
Common Misconceptions
Many homeowners simply don't know about homestead declarations and their benefits. Others miss out on homestead benefits due to misconceptions about the process.
Many assume the exemption is automatically applied when they purchase a home, which isn't always the case. Lastly, some states require periodic renewal or reapplication.
Homestead declarations don't protect against all types of creditors, particularly secured creditors like your mortgage lender.
Differences Between States
Homestead laws vary dramatically from state to state. Here are a few examples from the most populous states:
Texas and Florida offer unlimited value protection against creditors, while most other states cap protection at specific dollar amounts.
California has a complicated system with different protection levels depending on age, marital status, and income.
California and Florida tie homestead exemption amounts to inflation, while other states maintain fixed amounts.
Please research your specific state's homestead laws or consult with a professional.
When To Consider Filing
The best time to file a homestead declaration is immediately after purchasing your home. However, it's never too late to file if you haven't already. Consider filing or reviewing your homestead status:
After purchasing a new primary residence
If you've been living in your home but never filed
When you experience significant life changes such as marriage, divorce, or retirement and move your primary residence
If you're concerned about potential creditor issues
Before the annual deadline in your jurisdiction to receive tax benefits for the coming year
The Bottom Line
Ownwell can assist you in navigating the homestead declaration process and finding other ways to lower your property tax burden, such as property tax appeals. Our experts specialize in helping homeowners save money through appeals and exemptions.
Discover how we can help you maximize your homestead benefits and property tax savings.