In certain states, homeowners can take advantage of what’s called a homestead exemption. Basically, a homestead exemption allows a homeowner to protect the value of her principal residence from creditors and property taxes. A homestead exemption also protects a surviving spouse when the other homeowner spouse dies. State homestead exemptions often have four features, including the well-known property-tax exemption on a portion of a home’s assessed value.
A homeowner’s understanding when it comes to homesteading her property most often has to do with the property-tax exemption. Generally, this advantage of homesteading pertains to shielding a portion of a home’s value from property taxes. Often, a typical homesteading advantage is that it’ll exempt the first $25,000 to $75,000 of a home’s assessed value from all property taxes. With a $50,000 homesteading exemption, you’ll only owe property taxes on the home’s remaining assessed value.
Forced Sale Immunity
With a homestead exemption, your home is shielded from a forced sale to satisfy creditors. For example, the lender financing your automobile can’t force the sale of your home if you default on your auto loan. Before homestead exemptions, creditors could and often did try to seize a homeowner’s property to satisfy all kinds of debts. Homestead exemptions, however, don’t normally shield your home from forced sale in mortgage foreclosures or from defaulted property taxes.
Surviving Spouse Advantages
Utah’s homesteading laws work to protect the homestead interests of surviving spouses by guaranteeing their homesteading rights. State homestead laws vary, but surviving spouses under homestead laws retain the homestead right to their homes for life. For surviving spouses, as long as they use and occupy the homesteaded property, they won’t lose homestead rights. Surviving spouses on homesteaded properties, though, must make any mortgage and other payments due in order to retain their homesteading rights.
In order to declare a homestead on your home, it must be your principal residence. In Utah, homestead exemptions apply only to real property. You won’t be able to declare your house boat or motor home a homestead under certain state’s homesteading laws. Your homestead exemption and its advantages last until you effectively abandon the homestead, too. Commonly, you abandon an old homestead when you declare another home your new homestead.
The Utah Homestead Exemption Amount
Under the Utah exemption system, homeowners may exempt up to $30,000 of their home or other property covered by the homestead exemption. You may use the homestead exemption to protect more than one parcel of land, but you may protect up to one acre only.
Doubling for Married Couples
If you file a joint bankruptcy with your spouse in Utah, you can double the homestead exemption to protect up to $60,000 in your home.
The Scope of the Utah Homestead Exemption
In Utah, the homestead exemption applies to real property, including your home or mobile home. You may also protect water rights that you own, if the water is used for domestic or irrigation purposes. In order to use the $30,000 exemption to protect your home, it must be your primary personal residence. Utah law permits you to protect property that is not your primary personal residence, but if you don’t live in the property, the exemption amount is limited to $5,000. The homestead exemption also applies to sale proceeds for up to one year after the property is sold.
Can You Use the Federal Bankruptcy Exemptions in Utah?
Some states allow bankruptcy filers to use the federal bankruptcy exemptions instead of the state exemptions. Utah is not one of those states. If you reside in Utah, you must use the state exemptions.
In Utah, you must file a homestead declaration (a form filed with the county recorder’s office to put on record your right to a homestead exemption) in order to claim the homestead exemption. Contact your county recorder for information on how to file a homestead declaration. Refer to the Utah Code Section 78B-5-504 for the information you are required to include in your homestead declaration.
Other Information About the Utah Homestead Exemption
In Utah, you cannot use the homestead exemption to protect your property from debts due to property taxes or assessments, purchase (such as a mortgage), child support, or liens that you allowed against your property by mutual contract. Homestead exemptions work in two primary ways: flat-dollar exemptions or percentage exemptions.
A flat-dollar homestead exemption reduces the taxable value of your home by a set amount, like $25,000 or $50,000. This style of homestead exemption has a greater impact on people with lower-value homes, as a $50,000 exemption on a $150,000 home is a much greater percentage than the same exemption on a $500,000 home. Percentage exemptions, on the other hand, reduce the taxable value of a home by a certain percentage, like 15% or 40%. This has a bigger impact on homeowners with higher-value properties.
Homestead Tax Exemption Example
Homestead tax exemptions reduce the taxable value of your home, meaning you pay less to the government. Here’s how it works: If your home is worth $200,000, and your local property tax rate is 1%, then you’d normally owe $2,000. But if the homestead exemption is $25,000, then you’re taxed like your property is worth $175,000 meaning you owe just $1,750.
Who’s Eligible For A Homestead Mortgage Exemption?
Homestead exemptions are generally available only on primary residences, rather than second homes or investment properties. Some states offer their homestead exemption applications to all homeowners. Other states restrict their homestead tax exemptions to certain groups, or offer greater homestead exemptions to people in certain categories, such as:
• Elderly people
• People with disabilities
• Veterans, though often restricted to disabled veterans
• Disabled former law enforcement officers and first responders
Types Of Homestead Mortgage Exemptions
Here are a few examples of homestead mortgage exemptions in individual states. (Note: The exemptions listed below are typically not the only ones the state offers.)
The homestead exemption in Utah is included in the state constitution, allowing all homeowners to reduce the taxable value of their home by $7,000. The homestead exemption in New York is for veterans who have served in the U.S. armed forces and are homeowners. Depending on the type of service, several types of exemptions are offered. One of them, the Alternative Veterans Exemption, gives a 15% percentage exemption to veterans who served during a time of war, and is offered in more than 95% of the state’s cities and towns.
The homestead exemption in Texas, called the General Residence Homestead Exemption, allows homeowners to reduce the taxable value of their homes by $25,000 for school district taxes. The state’s Age 65 or Older or Disabled Persons exemption gives people in those categories an additional $10,000 exemption on the same taxes.
The homestead exemption in Florida allows homeowners to exempt up to $50,000 of the taxable value of their homes. The first $25,000 applies to all property taxes, which include school district taxes. Homeowners who have properties valued between $50,000 to $75,000 can deduct up to another $25,000 for non-school property taxes only. The state also exempts quadriplegic people and surviving spouses of first responders killed in the line of duty from all property taxes.
The West Virginia homestead tax exemption allows homeowners to exempt $20,000 in value from property taxes if they are age 65 or older or are permanently and completely disabled.
The Idaho homestead exemption allows people to exempt 50% of the taxable value of their home and up to one acre of land, for a maximum of $100,000 in exemption.
To get a homestead exemption, you typically have to apply for one, and every state has its own process. Typically, you’ll need to fill out a homestead exemption application with your county tax office. Many have application forms on their websites, which will ask you for the type of exemption you’re applying for and information about your property.
If you’re applying based on your age or a disability, you’ll likely have to provide documentation this can include:
• A birth certificate or government-issued identification (such as a driver’s license)
• Disability paperwork from a state or federal agency
• An affidavit from your physician
Homestead exemption applications are usually due by March or April of the year in which you intend to claim the exemption, though it could be as early as Dec. 31 of the year prior. Check with your county tax office. You may only need to file once, with the exemption renewing each year unless you move, but you should check your state’s rules to be sure.
Ways To Lower Your Mortgage Tax Bill
Owning a home can offer numerous tax benefits. If your state doesn’t offer a homestead mortgage exemption, or if you’re looking for other avenues to save money, here are a handful of ways to reduce your property tax bill:
• Appeal your tax assessment. Between 30% to 60% of the taxable properties in the U.S. are overvalued, according to the nonpartisan National Taxpayers Union Foundation. If you don’t agree with your valuation, file an appeal with your local tax authority.
• Deduct your mortgage interest payments. You’re allowed to deduct interest paid on up to $750,000 in home loans on your federal taxes, including the mortgage on your primary residence and a home equity loan or a line of credit used to buy, build or improve your primary residence or a second home.
• Deduct the value of your home office. If you’re self-employed, you may be able to deduct $5 per square foot of your home office on your taxes.
How To Start A Homestead
Moving from a typical modern lifestyle to being a homesteader is often a gradual process. You don’t have to sell everything and move to the country all at once. A lot of people have a romantic and idealized dream of what homesteading would be like.
Step 1: Consider What Homesteading Involves
You should really stop and think about what the day-to-day activities and chores will be like if you decide to become a homesteader. Taking care of crops and livestock, in particular, are time-consuming and physically demanding tasks, and not everyone is cut out for it. If you have a spouse or partner, you also need to make sure they’re 100% on board, and that homesteading is the kind of life that both of you are looking for. You’ll need to sit down and have open and honest discussions about what you’re looking for. If your partner hates the idea of getting their hands dirty, then living a homestead lifestyle will be very difficult for you. You should spend hours and hours learning everything you can about homesteading before you decide to make any kind of commitment. Don’t make a major homesteading decision without having all the facts and knowledge needed. Watch documentaries, read books and fully immerse yourself in the homestead mindset. If you’ve got friends or family who already have a homestead of their own, see if you can spend a few days helping out to get a feel for what the lifestyle is like. And be sure to ask them lots of questions.
Step 2: Set Goals For Yourself
If you followed Step 1 and realized that devoting yourself to taking care of a farm full-time isn’t for you, that’s totally okay. You can still practice homesteading and have a sustainable lifestyle without selling everything and moving to the country. Even in an urban setting you can start a vegetable garden, get a few backyard chickens and begin preserving your own food.
Step 3: Decide Where You Want To Live
Your goals in Step 2 will help decide what size of a property you’ll need. If you plan to have a full-time or part-time job still and just do homesteading as a hobby, then you can probably get by in an urban or semi-rural environment.
If you plan to make homesteading your full-time job and lifestyle, you’ll need enough room to grow all the vegetables and fruit that you need, plus space for cows, sheep, or any other livestock you want. In addition to figuring out how much land you need, you’ll also want to set parameters on the general area you want to live too.
Are you okay living in an ultra remote area, or do you want to be just outside of town? Make sure any land you look at will actually work for the type of homestead lifestyle you’re trying to accomplish. If you’re primarily looking to grow crops, then very sandy or rocky soil will make things more difficult, for example. Don’t forget to factor in travel time. Do you really want to drive 1.5 hours every time you need to pick up something from the grocery store, or go to work every day (if you’re still going to have a job?) Are you okay with the fact that it may take an hour for police or an ambulance to arrive in case of an emergency? Even little things like needing to take a long walk down to your mailbox each day, or driving to your nearest post office once a week, may be more than what you thought you were signing up for. Also avoid the temptation to bite off more than you can chew. You don’t need 100 acres, or even 10, to have the homestead of your dreams.
Some important homestead factors to keep in mind during the planning stage include:
• Water access. Do you have nearby lakes, rivers, or ponds that you can use for water? Is there a well on the property? How much rainfall does the area get per year?
• Land safety. You don’t want to live somewhere that’s prone to drought if you’re growing your own food, and you also don’t want to be near oil fracking sites or other potential health hazards.
• Community. Sometimes the community you’re a part of is just as important as the land you buy. You will need to make friends and network with people in your area. If they have different religious or political views than you, it might be more difficult to fit in with the community, especially in a small village.
• School. If you have kids, is there a school nearby? If not, you may need to home school them.
Step 4: Make A Budget
Having a thoroughly thought-out budget is critical for homesteading, particularly if you’re planning to give up a steady job to become completely self-sufficient. If you’re buying land and property, it’s important not to use all your savings to buy it. Otherwise you won’t have any money left for renovations, improvements, equipment, or other necessary things. If you are giving up a job for a more self-sufficient lifestyle, you’re going to need to think of some ideas to generate income for yourself.
At a bare minimum you’re still likely going to need to pay property taxes, and potentially utilities as well as things like a phone or internet bill. You’re also going to want to have some savings in case of an emergency, such as if your furnace breaks, or a family member gets sick. It’s smart to have multiple streams of income from your homestead. You may try selling wool, milk products, extra produce, as well as things like soap making or other crafts. That way if your crops all die or you find out there’s no demand for one income source, you have something else to fall back on. Obviously you don’t want to spread yourself too thin. But it’s not all that uncommon for homesteaders to have 5 or 10 different products or sources of income.
Step 5: Start Small
You don’t need to wait until you have your dream farm to begin. You can start your journey into homesteading right away. Much of homesteading is a mindset and lifestyle, as opposed to where you live. Whatever your situation is, even if you’re living in an apartment, you can start moving toward a more self-sufficient lifestyle this week. If you have a sunny window, you can start growing your own herbs or lettuce indoors. Got a large backyard that’s not being used to grow much besides grass and weeds? Put in a garden or raised bed next spring and start growing a portion of the vegetables for your household. (Be sure to pick vegetables that you actually enjoy and want to eat regularly!) Have a fireplace that you don’t currently use? Time to clean out your chimney and get some wood, and start using it to reduce your heating bill! Over time you can gradually add more and more projects. Even if you only make one or two small lifestyle changes per year, things will really start to add up over time. You could even start raising chickens or beekeeping in your backyard. Just be sure to check what your local bylaws are to make sure it’s allowed first!
Homesteading is all about what feels right for you. You can define your priorities and do things in whatever order makes the most sense to you. For some people, self-sufficient energy may be a priority so they may want to invest in solar panels right away. Other people may not mind paying for gas and electricity. Some people may want to start raising livestock right away for egg and meat production, while some people may choose to never go down that route due to ethical reasons.
Step 6: Continually Simplify Your Life
Homesteading often goes hand-in-hand with minimalism and living a more frugal lifestyle. A big part of that is getting out of the cycle of always needing the newest and greatest phones, gadgets, trendy clothing, and other things that can suck money out of your bank account but not really offer much value. For homesteaders, less is more, and there’s usually a cheaper and better way to do something. You should be continuously taking an audit of your life to see what things are draining your money, time, and energy, and seeing if you can reduce or completely eliminate them from your life. Adding homesteading to your lifestyle will often require taking some previous things out. Some things might be obvious. Other things may be more subtle and take more insight to figure out how to reduce or remove them from your life.
Step 7: Learn To Preserve Food
There are tons of different ways to preserve food, but the idea of food preservation in general is becoming a bit of a dying art. Even picking up one food preservation skill like canning, pickling, freezing, cold storage, dehydrating, or smoking can help cut down on your food costs. If you’re growing your own fruits and vegetables, then learning to preserve food is an absolute must. You’re likely going to have far more food at the end of the season than you know what to do with. And if you can’t preserve it, then most of it will end up going to waste. You’ll need to find a way to keep your produce from spoiling so that you can keep your family fed all throughout the winter months. Even if you don’t grow your own food, learning to preserve will allow you to buy food in season when it’s cheapest and most ripe, and continue eating it all year round. You probably know someone who has some extra canning supplies that you can borrow just to try it out. Even if you need to buy your own canning jars or a food dehydrator, they will often pay for themselves within the first one or two uses.
Starting to use cold storage is as easy as finding a cool, dark place in your basement or under your home where you can store things.
Step 8: Make Friends With Other Homesteaders
Homesteading is often associated with hermits or people who aren’t very sociable. But the truth is that many homesteaders are very friendly and eager to share what they know with anyone who’s interested. Having a homesteading buddy who is more experienced than you can really help if you have questions or concerns at any step along the way. They’ll know about the weather, growing conditions, laws, and lots of other useful information that you’ll need, because they’ve likely been through it all themselves already. And don’t discount having the moral support and someone who lives the same lifestyle as you being there, when everyone else is telling you that you’re crazy. Networking with other homesteaders makes sense from a material perspective too. If you’ve grown too many peppers and your friend has too many eggs, then it’s easy to barter for what you need. Or you might even set up long-term arrangements with other homesteaders to trade for food and supplies that you don’t necessarily want to produce yourself. You might only need a plow once per year at the start of the season, and it could make more sense to just borrow it from a neighbor as opposed to buying one for yourself.
Free Initial Consultation with a Real Estate Law Firm
It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506
Can I Convert My Chapter 13 To Chapter 7?
Moving And Relocation After Divorce
Structured Product Investment Lawyer
Estate Planning Attorney Farmington Utah