You can protect your home in bankruptcy and other debt collection scenarios with a homestead exemption, under the Utah Homestead Act. The homestead exemption allows a homeowner to protect the value of her principal residence from creditors and property taxes up to the statutory limit. A homestead exemption also protects a surviving spouse when the other homeowner spouse dies. The homestead exemptions protects equity in the home from creditor attachment in four scenarios.
Property Taxes
The homestead exemption protects the statutory limit from from the allocation of 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.
Homestead Requirements
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.
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 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.
