An owner occupied exemption, more commonly known as a homestead exemption, is a tax benefit that reduces property taxes for homeowners’ primary residence. This valuable tax relief program exists across the U.S., though specific eligibility requirements and benefits vary by state and local jurisdiction. The owner occupied exemption term is most often used in Illinois.
Understanding how these exemptions work can save hundreds or thousands of dollars annually on your property taxes.
What Is an Owner Occupied Exemption?
An owner occupied exemption is a tax benefit designed to provide financial relief to homeowners who use their property as their primary residence rather than as an investment property. The basic principle is straightforward: If you own and live in your home, you may qualify for reduced property taxes.
This exemption serves several important purposes:
Reducing the tax burden on homeowners
Encouraging homeownership
Helping residents afford to stay in their homes as property values increase
Providing added protection against certain creditors in some states.
How Owner Occupied Exemptions Work
When you qualify for an owner occupied exemption, the taxable value of your property is reduced before tax rates are applied. This reduction happens in three main ways, depending on your location.
A reduction in assessed value subtracts a fixed dollar amount from your property's assessed value before taxes are calculated.
Percentage reduction reduces your property's assessed value by a percentage in some jurisdictions.
Tax rate reduction provides qualified homeowners with a lower tax rate than non-owner-occupied properties in certain areas.
For example, if your home is valued at $300,000 and your state offers a $50,000 homestead exemption, you would only be taxed on $250,000 of your property's value. A 1% tax rate would save you $500 annually.
Eligibility Requirements
While requirements vary by location, most owner occupied exemptions share these common eligibility criteria:
You must own the property.
The property must be your primary residence.
You must have lived in the property for a minimum period (often January 1 of the tax year).
You typically can only claim one owner occupied exemption at a time.
You may need to provide proof of residency.
Some jurisdictions also offer enhanced exemptions for specific groups. These often include:
Older adults, usually aged 65 and above, receive additional benefits in many areas.
Veterans often qualify for special exemptions or reductions based on service.
Disabled persons may receive enhanced exemptions in many jurisdictions.
Low-income homeowners might qualify for additional relief programs in some areas.
How To Apply for an Owner Occupied Exemption
Applying for an owner occupied exemption generally follows these steps:
Determine eligibility by checking your state and local requirements
Find the application on your county's property appraiser or tax assessor website
Gather documentation and submit your application by the deadline
Be aware of renewal requirements in your jurisdiction.
Required documentation usually includes:
Proof of ownership (deed or title)
Proof of residency (driver's license, voter ID, utility bills)
Your Social Security number
A completed application form
Missing out on exemptions can cost homeowners thousands in unnecessary taxes. Ownwell can help homeowners nationwide retroactively apply for homestead exemptions for up to two years.
Deadlines and Timing
Knowing the application deadline is crucial, as missing it could delay your tax benefits by an entire year.
Most jurisdictions require applications to be filed by a specific date each year (commonly between January 1 and April 1). New homeowners should apply as soon as possible after purchase.
If you miss the deadline, you typically must wait until the next tax year to receive the exemption, though some counties offer late filing options with penalties or reduced benefits.
Owner Occupied Exemptions by State
While we can't cover every state's program in detail, here are some notable examples of how owner-occupied exemptions work in different states:
Texas offers a $100,000 homestead exemption for school district taxes and optional exemptions for other taxing units.
Florida provides a $25,000 exemption on the first $50,000 of assessed value for all taxes, plus an additional $25,000 exemption on assessed value between $50,000 and $75,000 for non-school taxes.
California protects from dramatic tax increases under Proposition 13, limiting assessed value increases for owner-occupied homes to 2% annually until the property is sold.
New York offers the School Tax Relief (STAR) program, which provides school tax exemptions for owner-occupied primary residences.
Illinois provides a general homestead exemption that reduces the property's equalized assessed value by up to $10,000 (it varies by county).
Common Mistakes To Avoid
When applying for or maintaining an owner occupied exemption, be careful to avoid these pitfalls:
Failing to apply because you don't know about the exemption
Missing application deadlines
Not reporting changes in primary residence status
Claiming multiple exemptions in different jurisdictions
Assuming automatic enrollment when purchasing a new home
Additional Benefits of Owner Occupied Exemptions
Beyond the direct property tax savings, owner occupied exemptions may offer additional benefits such as protection from tax increases in states that cap annual assessed value increases, creditor protection in bankruptcy or judgment proceedings in some states, portability when moving to a new primary residence within certain states, and eligibility for additional tax relief programs.
When You Might Lose Your Exemption
Several circumstances can cause you to lose your owner occupied exemption:
Moving out of the property
Renting the entire property to someone else
Claiming a similar exemption on another property (including in another state)
Death of the qualifying homeowner — although there are exemptions to this
Failing to respond to verification requests from the tax assessor
How To Verify Your Exemption Status
It's wise to periodically confirm that your exemption is correctly applied to your property tax bill.
We recommend carefully reviewing your annual property tax bill or assessment notice and looking for line items indicating exemptions or reduced assessed values.
Also, contact your local tax assessor's office if you don't see your exemption applied, and check your county's property tax database online, which often shows exemption information.
Combining With Other Tax Relief Programs
In many jurisdictions, you can combine an owner occupied exemption with other property tax relief programs.
Circuit breaker programs provide tax credits for low-income homeowners whose property taxes exceed a certain percentage of their income.
Deferral programs allow seniors or other qualified individuals to postpone paying some property taxes until the home is sold.
Veteran exemptions offer additional tax benefits for military veterans that can be claimed alongside standard homestead exemptions.
Disability exemptions provide supplemental exemptions for homeowners with qualifying disabilities.
Appealing Your Property Assessment
Even with an owner occupied exemption, your property might be overvalued for tax purposes. At Ownwell, we often see properties assessed at values higher than their actual market worth.
Thus, it’s essential to appeal your assessment, which could further reduce your tax burden.
If you believe your property is overvalued, gathering evidence of comparable home sales in your area can help support your appeal.
Remember that assessment appeals typically have strict deadlines, often within 30 days of receiving your assessment notice.
The Bottom Line
An owner occupied exemption is one of the most straightforward ways to reduce your property tax burden. By taking advantage of this benefit, you could save hundreds or even thousands of dollars annually. These savings can add up significantly over the years you own your home.
At Ownwell, we understand that navigating property tax exemptions can be confusing, especially with varying rules across different jurisdictions. Our team of local property tax consultants can help you understand if you're receiving all the exemptions you're entitled to and identify opportunities for additional savings.
Don't leave money on the table.
Check if you qualify for an owner occupied exemption in your area, and ensure you're taking full advantage of this valuable tax benefit. If you’ve missed previous years’ exemptions, we can help retroactively apply for homestead exemptions for up to two years!
If you've already applied for available exemptions but still think your property taxes are too high, Ownwell can help you appeal your property taxes.
Ready to see if you're overpaying on property taxes? Learn how Ownwell can help you secure the savings you deserve on your property taxes.