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Utah Homestead Exemption

Utah Homestead Exemption

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. 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.

Homestead Declarations

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 Exceptions

Unfortunately, Utah’s homestead exemption laws might not protect you from every creditor. There are four general exceptions under which you may still be forced to sell or forfeit property or real estate:
• If there was a pre-existing lien on the property before the establishment of homestead;
• If the homestead property was specifically pledged as credit for a mortgage;
• If you owe past due taxes to the State of Utah and Utah counties or municipalities; or
• If you owe money to mechanics, contractors, or builders for work performed in repairing or improving the property.

Additionally, these homestead protections exist as state laws, and federal income tax liens may be superior to Utah’s homestead exemptions. Under the Constitution’s Supremacy Clause, state laws are subject to federal override if there is an overlap or a conflict of law. However, the Internal Revenue Service (IRS) has generally been averse to foreclose on a citizen’s home to collect on a tax debt. Instead, the IRS usually gets involved only if a homestead property is mortgaged or sold off before the federal tax lien has expired. The homestead exemption is a legal provision that helps shield a home from some creditors following the death of a homeowner’s spouse or the declaration of bankruptcy. The homestead tax exemption can also provide surviving spouses with ongoing property tax relief, which is done on a graduated scale so that homes with lower assessed values benefit the most.

The homestead exemption is helpful since it is designed to provide both physical shelter and financial protection, which can block the forced sale of a primary residence. However, the homestead exemption does not prevent or stop a bank foreclosure if the homeowner defaults on their mortgage. Foreclosure occurs when a bank takes possession of a home due to failure to make timely mortgage payments.

How Property Taxes Work

If you’re not familiar with property taxes, here’s a quick refresher. The value of your home will be assessed, and then a property tax rate will be applied to that assessed value. You can appeal the value if you think it’s too high, but in general property tax bills are what they are. Property tax rates fluctuate according to the decisions and needs of the tax authorities in your area. If the city decides it needs more funds, property tax rates may increase. Sometimes, residents can vote on these rate changes and in other cases the decision is made with public input but doesn’t require public consent.

How Homestead Tax Exemptions Work

Homestead tax exemptions shelter a certain dollar amount or percentage of home value from property taxes. They’re called “homestead” exemptions because they apply to primary residences, not rental properties or investment properties. You must live in the home to qualify for the tax break. Some states exempt a certain percentage of a home’s value from property taxes, while other states exempt a set dollar amount. If your state uses a percentage method, the exemption will be more valuable to homeowners with more valuable homes. If your state uses a flat dollar amount for its exemption, the exemption will be more valuable to homeowners with less expensive homes.

Who’s Eligible for the Homestead Tax Exemption?

In some states, you’ll get the homestead exemption (or a bigger one) if your income is low, you’re a senior, you have a disability or you are a veteran. In most cases, these exemptions can’t be combined if you fall into more than one category. Some states also set an upper limit on the value of homes that can qualify for exemptions. State governments can’t directly affect property tax rates because rates are set at the local level. So statewide homestead tax exemptions are a way for state governments to lower property tax bills indirectly. They do this to encourage homeownership, keep residents happy and give a property tax discount to people in need of a tax break.

What Kinds of Exemptions Are Available?

There are multiple kinds of homestead exemptions available, and they vary by location. Some exemptions are mandatory state-wide, while others are “local option,” meaning it is up to the county or city government to decide the extent of the exemption.

 School taxes: All residence homestead owners are allowed a $25,000 homestead exemption from their home’s value for school taxes.
 County taxes: If a county collects a special tax for farm-to-market roads or flood control, a residence homestead is allowed to receive a $3,000 exemption for this tax. If the county grants an optional exemption for homeowners age 65 or older or disabled, the owners will receive only the local-option exemption.
 Age 65 or older and disabled exemptions: Individuals age 65 or older or disabled residence homestead owners qualify for a $10,000 homestead exemption for school taxes, in addition to the $25,000 exemption for all homeowners. If the owner qualifies for both the $10,000 exemption for age 65 or older homeowners and the $10,000 exemption for disabled homeowners, the owner must choose one or the other for school taxes. The owner cannot receive both exemptions.
 Optional percentage exemptions: Any taxing unit, including a city, county, school, or special district, may offer an exemption of up to 20 percent of a home’s value. But, no matter what the percentage is, the amount of an optional exemption cannot be less than $5,000. Each taxing unit decides if it will offer the exemption and at what percentage. This percentage exemption is added to any other home exemption for which an owner qualifies. The taxing unit must decide before July 1 of the tax year to offer this exemption.
 Optional age 65 or older or disabled exemptions: Any taxing unit may offer an additional exemption amount of at least $3,000 for taxpayers’ age 65 or older and/or disabled.

Who Qualifies for an Exemption?

Any homeowner in the state of Utah can qualify for a homestead exemption, so long as you meet the following criteria:
 You own your home as of January 1 of the tax year and reside in it as your primary residence.
 You are an individual homeowner, not a corporation or business entity.
 You did not claim any other property for homestead exemption in the same tax year.

How to Apply For a Homestead Exemption

Applying for a homestead exemption may sound complicated, but with a two-step process and familiarity with the deadlines, you can save thousands of dollars on your property taxes.

Steps to Apply

 Download the Residence Homestead Exemption Application from your county appraisal district’s website and fill it out.
 Mail your completed form, along with all required documents, to your county appraisal district.
Required Documents
To complete your Residence Homestead Exemption Application, you will need
 The Residence Homestead Exemption Application for your county appraisal district.
 A copy of your valid Utah driver’s license or identification card with an address matching your homestead address.

Manufactured homeowners must also provide one of the following:
 A copy of the Utah Department of Housing and Community Affairs statement of ownership.
 A copy of the sales purchase agreement, other applicable contract or agreement or payment receipt.
 A sworn affidavit indicating that you are the owner of the manufactured home and the seller did not provide you with the applicable contract or agreement.

Selling or Buying a Home with an Existing Homestead Exemption

Very few people buy or sell a home on January 1, so property taxes can get confusing in that first year as both the buyer and seller will owe taxes on the property, pursuant to their time in ownership. Homestead exemptions will also apply to those taxes, so it’s important to know the rules. For properties with standard homestead exemptions in place, those exemptions will usually remain for the year of the sale and the taxes will reflect those exemptions, benefitting both seller and buyer. The buyer will then have to apply for a homestead exemption in the following year as the new owner of the property. It is important to note that any homestead cap in place will be removed when the new homestead exemption is applied for and this can cause a significant jump in property taxes that first year as the home will be taxed based on its full appraised value.

If the property has an Age 65 or Older or Disability exemption, the exemption will only stay in place for the year if the qualifying person does not establish a homestead exemption on their new property during that year or if the new owner qualifies for that exemption in their own right.

If those criteria are not met, the taxes will be prorated and the homestead exemption will only be in effect during the time when the qualifying party owned the property. Again, property taxes in this situation could be much higher than what was paid the previous year.

Other Property Tax Exemptions

There are a number of additional partial or absolute property tax exemptions available to Texas property owners. They offer exemptions for a variety of circumstances, including inherited property owned by multiple parties, solar and wind-powered improvements, and properties owned by charitable organizations, to name a few.

Benefits of Homesteading Your Primary Residence

Homesteading your principal residence has many advantages. Below are three reasons why you should definitely consider checking to see if your property qualifies for the homestead tax exemption.

1. Tax Exemptions
Everyone loves a property tax cut. Homesteading a house in Florida grants you a property tax exemption that is based on the assessed value of your property. It is currently possible to have up to $25,000-$50,000 deducted from your property’s assessed taxable value.

2. Protection of Your Property
A property that has been homesteaded is protected from forced sale to satisfy debts for personal loans. This means that if you wind up owing any credit card companies an enormous amount of money; they are forbidden from coming after your home. However, homesteading your property does not protect you from foreclosures for not paying your property taxes, mortgages, homeowners association fees, and construction fees. Even with a shield, it is always a good idea to pay off your debts in a timely manner.

3. Protection for Your Family
Homesteading your property guarantees that your family will still have a home after you are gone. Homesteading ensures that if you are married and pass away, your surviving spouse and children will inherit the estate. Even if a will states otherwise the operation of law will protect your family from being displaced from their home. The signature of both spouses is required on all documents in a homesteaded property. Even if the property is titled in one spouse’s name only.

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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!

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506
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