There are multiple ways to reduce property taxes. Creating a homestead exemption is one way to accomplish this goal. This kind of exemption reduces the taxable value of a person’s home. For example, if someone has a home valued at $500,000, and then takes advantage of a $50,000 homestead exemption, that individual would only have to pay property taxes on $450,000 of their home’s value.
Twenty-two states offer a homestead exemption to all homeowners. As seen in the map below, most, 18, only provide a homestead exemption if the property is the person’s primary residence. This means that owners of second and third homes can only claim a homestead exemption for one of their properties. By limiting the benefit to a person’s primary home, policymakers are able to target the benefit and increase equity.
Importantly, of the many ways to reduce property taxes, homestead exemptions are one of the few progressive options. Exemptions typically provide greater value for owners of middle- and lower-value properties. The progressivity of homestead exemptions is particularly notable when compared to assessment rate cuts, which is another popular way to reduce property taxes. The chart below examines the impact of an assessment rate cut versus a homestead exemption for a middle- and a high-value home. While property taxes are reduced for both homeowners, the homestead exemption provides a relatively greater benefit for the homeowner of the middle value property.
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