Do you want to save money on your taxes?

The April 1st deadline in Georgia to apply for Homestead Exemption is just over a month away. It is quite easy to get this exemption so I wanted to share the benefits of it to homeowners in Georgia. As I started to learn the ins and outs of homestead exemption, I did a deep dive into property taxes in general. I realized that I typically just let my mortgage escrow account pay my property taxes and haven’t really paid attention to my annual property tax bill. If you are interested, there are more details on how to decode your tax bill footnoted.

First, what is homestead exemption?

Homestead exemption is a program designed to reduce the property tax burden on homeowners by exempting a portion of their home's value from taxation. This exemption applies only to primary residences, not rental properties or vacation homes. Eligibility criteria and the amount of exemption vary by state and sometimes even by county within the state. There are also provisions for seniors; again, depending on the county.

In Athens-Clarke County eligible homeowners can exempt up to $10,000 of the assessed value of their primary residence from taxation. This means that the taxable value of the home is reduced by $10,000, resulting in lower property tax bills. For many homeowners, especially those on fixed incomes or with limited financial resources, this exemption can make a meaningful difference in their annual expenses. Clarke County residents can find more information on accgov.com.

In Oconee County homestead exemption provides eligible homeowners with a reduction in the assessed value of their primary residence for property tax purposes. Currently in Oconee it is a $2,000 reduction with new provisions starting to lower the taxes for Seniors. Read more on the Oconee County Property Appraisal website.

But what does it mean to lower your assessed value by $2,000 or $10,000? How does that practically affect what you actually owe?

Let's consider a hypothetical scenario to illustrate the impact of the $10,000 homestead exemption on a homeowner's annual property tax bill in Athens-Clarke County, Georgia.

Suppose a homeowner's primary residence in Athens-Clarke County has an assessed value of $200,000 (which is very rarely the ACTUAL value of the home - most of the time it is worth more on the open market). Without the homestead exemption, the homeowner would be taxed on the full assessed value of $200,000.*

Now, with the $10,000 homestead exemption, the taxable value of the home is reduced by $10,000. So, instead of being taxed on $200,000, the homeowner is taxed on $190,000 ($200,000 - $10,000).

To calculate the property tax savings, we'll need to know the millage rate, which is the rate used to calculate property taxes. Currently in Clarke County the mills rate is 31.25 (0.03125).**

The property tax bill can be calculated as follows:

Property Tax = (Taxable Value of Home) x (Millage Rate)

               = ($190,000) x (0.03125)

               = $5,937.50

Without the homestead exemption, the property tax bill would have been:

Property Tax (without exemption) = ($200,000) x (0.03125)

                                        = $6,250

So, the annual property tax savings due to the $10,000 homestead exemption would be:

Savings = Property Tax (without exemption) - Property Tax (with exemption)

              = $6,250 - $5,937.50

              = $312.50

Therefore, the $10,000 homestead exemption would save the homeowner $312.50 annually on their property tax bill in Athens-Clarke County, Georgia.

If saving over $300 every year isn’t enough reason to file, last year and possibly in future years, the state of Georgia offered a credit only for homestead exempted properties. This credit on my personal residence saved me an additional $270. Without homestead exemption you will never be eligible for any incentives offered only to owners of their primary residence.

HOW DO I FILE FOR HOMESTEAD EXEMPTION?

In order to claim your homestead exemption, you simply need to visit the Athens-Clarke County or Oconee County Tax Assessor's Office (or whatever county you reside in). You'll need to complete the homestead exemption application form and provide documentation such as proof of ownership (deed or settlement statement) and proof of residency (driver's license or utility bill).

By taking advantage of homestead exemption, homeowners can reduce their property tax burden and enjoy significant savings. Be sure to review the eligibility criteria, application timeline, and required documentation carefully, and don't hesitate to reach out to the respective county tax assessor's office for assistance with the application process.

FOOTNOTES

*You may notice on your tax bill “Adjusted FMV (fair market value)” with a much higher number than the column next to it that says “Net Assessment.” Property taxes are often assessed based on a percentage of the fair market value of a property rather than the full fair market value for several reasons:

1. Uniformity: Using a percentage of the fair market value ensures that property taxes are applied uniformly across different properties. It helps prevent disparities in tax burdens between properties of similar value.

2. Stability: Property values can fluctuate over time due to changes in the real estate market, economic conditions, and other factors. By using a percentage of the fair market value, tax assessments can remain relatively stable even as property values change.

3. Predictability: Property owners can more easily predict their property tax liabilities when taxes are based on a fixed percentage of the fair market value. This predictability allows homeowners to budget and plan for their tax obligations.

4. Administrative Efficiency: Assessing property taxes based on a percentage of fair market value simplifies the assessment process for tax authorities. It provides a straightforward method for calculating taxes and reduces administrative burdens.

In many jurisdictions, including Georgia, the assessed value of a property for tax purposes is typically a percentage of its fair market value, commonly around 40%. This assessed value is then used to calculate property taxes based on the applicable millage rate. The specific percentage used may vary by state or local government regulations. The $200,000 value given in the example is close to many people’s current net assessment value.

**A mill rate, also known as a millage rate, is the rate used to calculate property taxes. It represents the amount of tax payable per dollar of the assessed value of a property. One mill is equal to one-tenth of one percent, or 0.001. So, a millage rate of 30 mills (0.030) means that for every $1,000 of assessed property value, the property owner would owe $30 in taxes. For example, if a property has an assessed value of $200,000 and the millage rate is 30 mills (0.030), the property tax would be calculated as follows:

Property Tax = (Assessed Value of Property / 1,000) x Millage Rate

             = ($200,000 / 1,000) x 30 mills

             = $6,000

So, the property tax bill for this property would be $6,000 based on a millage rate of 30 mills. The millage rate is determined by local governments to generate revenue to fund public services such as schools, roads, police, and fire departments.