Homestead Exemption – Protect Yourself from Creditors & Reduce Property Taxes

By:  Henry VanBuskirk, CFP®, Wealth Manager

One of the most heavily quoted statements that I’m sure that you have heard at some point in your life is, “Nothing in life is guaranteed, except for death and taxes”. I’m not here to tell you about a magical snake oil that makes you live forever (since that of course doesn’t exist). We live in the real world where death and taxes are unavoidable. I am here to talk to you about how you can help protect yourself and your family from the effects of a loved one’s passing away, how you can legally reduce your property tax bill depending on which state you live in, and how you can help shield yourself from creditors. What I am talking about is electing a homestead exemption.

Each state has its own homestead rules and for purposes of making a succinct article, I am only going to focus on California, Arizona, Florida, and Texas. If your primary residence is in one of the other 46 states, please check with your local county assessor’s office to check what the rules are and what options are available to you in your state.

First off, what is the homestead exemption? The homestead exemption is a way to minimize property taxes for a homeowner’s primary residence. It is also a legal provision that also can help shield a home from unsecured creditors following the death of a homeowner’s spouse or the declaration of bankruptcy.

 Here is an example of how the homestead exemption can help lower your property tax bill.

Example:  Assume that the value of your home is $500,000 and your property tax rate is 1%.  Your property tax bill would then be $5,000.  Assume that you are eligible for a homestead exemption of $50,000.  This would then reduce the taxable value of your home to $450,000.  Your property tax rate would still be 1% and your property tax bill would be reduced to $4,500.

There is also a legal provision that allows unsecured creditor protection against the forced sale of your home when you elect the homestead exemption. Notice how it states ‘Unsecured’ instead of ‘Secured’ creditor protection. An unsecured creditor is any creditor that is loaning money to you without obtaining specified assets or collateral. Some examples of unsecured debt include credit cards, student loans, and unpaid medical bills. A secured creditor is any creditor that is loaning money to you with obtaining specified assets or collateral. Some examples of secured debt include a mortgage, auto loans, and a line of credit against your investment account.

It is important to discuss what the homestead exemption can and can’t do, so that one does not have unrealistic expectations on what asset protection and property tax bill reduction a state will allow. In general, the protection against unsecured creditors is limited and is only applicable to the homeowner’s equity in the home. If the limit is exceeded, unsecured creditors still may force a sale of the home, but the homeowner may be allowed to keep a portion of the proceeds. It will also not stop a bank foreclosure.

Now that we have the basics down, I will now get into more detailed information for California, Arizona, Florida, and Texas.


California passed Assembly Bill 1885 back in 2020. This legislation dramatically increased the unsecured creditor protection in California to a minimum of $300,000 or the median price of a home in your county, not to exceed $600,000. For example, the median home price in Orange County (OC) is $1,100,000, so anyone in OC would get an exemption of $600,000. Given the current home valuations in CA, it is hard to think anyone would get $300,000. Most likely, individuals will get whatever the median home value is in their county. The California Constitution provides a $7,000 reduction in the taxable value for a qualifying owner-occupied home. The home must have been the principal place of residence of the owner on the lien date, January 1st.

To apply for a homestead exemption, you would do so by completing the application online with your local county assessor’s office. It is also recommended that you discuss with your local county assessor’s office your unique situation and what options are available to you.    


Arizona does have homestead exemption laws, but none of those laws allow you to decrease the taxable value of your home for purposes of potential savings on property taxes.  As of January 1, 2022, Arizona  increased the homestead exemption to $250,000 from the forced sale of your home by unsecured creditors for any person who:

  • Has an interest in real property (owns a single-family residence), or
  • Owns a condo, or
  • Owns a mobile home, or
  • Owns a mobile home plus the land on which that mobile home located.

This legislation though did weaken the protections provided by the homestead provision for individuals as well. This bill provides more ways for creditors to collect on civil judgments.


Florida is one of the few states that have unsecured creditor protection. Simply put, a creditor cannot force the sale of a homestead to satisfy a judgment. This protection from creditors combined with the fact that Florida does not impose state income taxes, shows why it’s not surprising to see more and more people relocating to the Sunshine State. Florida also allows for the following homestead exemption rules that all must be applied for. Applying for a homestead exemption would grant you the following:

  • A $25,000 exemption that is applied to the first $50,000 of your property’s assessed value if your property is your permanent residence and is owned on Jan 1st of the tax year applied for.  This applies to all taxes, including school district taxes.
  • An additional exemption of up to $25,000 is applied if your property’s assessed value is between at least $50,000 and $75,000. However, this exemption is not applied to school district taxes.
  • You could also qualify for the 3% Cap Save Our Homes assessment limit. This limits the increase to the assessed value of a homestead property for tax purposes to a maximum of 3% per year or the amount of the change in the Consumer Price Index, whichever is lower.

You would apply either by an online application or by going to your local county property appraiser’s office for a paper application. Either way, it is recommended that you discuss your unique situation with your local county property appraiser’s office to check what options are available to you.


Texas, like Florida, also offers unsecured creditor protection and does not impose a state income tax. This of course does have some limitations. The property tax in Texas is locally assessed and locally administered tax. However, there are some limits based on the acreage and use of the homestead. 

Here are the many types of exemptions available to you if you are applying for a homestead exemption:

  • A $40,000 residence homestead exemption for the home’s value for school taxes.
  • If there is a special tax for farm-to-market roads or flood control, you may receive a $3,000 exemption for this tax. If your county grants an optional exemption for homeowners aged 65 or disabled, that household would only receive the local-option exemption
  • For Disabled persons or persons aged 65 or older:
    • You can qualify for a $10,000 residence homestead exemption for school taxes in addition to the $40,000 exemption for all homeowners. If the owner qualifies for both the $10,000 exemption for over 65 and the $10,000 exemption for disabled homeowners, the owner must choose one or the other for school taxes.
    • Any taxing unit may offer an additional exemption up to $3,000.

To apply for a homestead exemption, you would need to check with your local appraisal district on how to apply and discuss what options are specifically available to you.


The goal of this article is to get you thinking about asset protection planning and to offer our services to help you reach your asset protection goals. Our team can work with you and an attorney to make sure those goals are being satisfied.


  1. https://www.investopedia.com/terms/h/homestead-exemption.asp
  2. https://www.investopedia.com/terms/u/unsecuredcreditor.asp
  3. https://www.investopedia.com/terms/s/secured-creditor.asp
  4. https://www.boe.ca.gov/proptaxes/homeowners_exemption.htm
  5. https://www.boe.ca.gov/proptaxes/homeexem.htm
  6. https://www.sccassessor.org/tax-savings/transferring-your-assessed-value/senior-citizen-over-age-55-outside-county
  7. https://www.azleg.gov/ars/33/01101.htm
  8. https://www.pbcgov.org/papa/3-percent.htm
  9. https://www.pbcgov.org/papa/homestead-exemption.htm
  10. https://comptroller.texas.gov/taxes/property-tax/exemptions/
  11. https://www.realtor.com/realestateandhomes-search/Orange-County_CA/overview   

Disclosure: BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s website or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy (including those undertaken or recommended by Company), will be profitable or equal any historical performance level(s). Please see important disclosure information here.

Crisis Averted? Financial Help for Struggling Renters and Landlords

By one estimate, U.S. landlords were owed about $57 billion in unpaid back rent at the beginning of 2021. The average household that fell behind owed about four months of rent, or $5,600. Altogether, more than 10 million U.S. families were facing the possibility of eviction.1

Many landlords, including those who depend on rent payments for retirement income, have experienced financial difficulties in lockstep with their heavily impacted tenants. Although multi-family apartment complexes are often owned by large corporations, about 90% of single-family rentals are owned by small investors who are facing the risk of mortgage default, bankruptcy, or forced property sales.2

Fortunately, the March 2021 federal stimulus bill added almost $22 billion in housing assistance to the $25 billion previously allocated by Congress.3 In many cases, payments are being sent directly to landlords through new or existing local programs on behalf of renters who meet certain eligibility requirements.

Program parameters

Under the Emergency Rental Assistance Program (ERAP), the U.S. Treasury has distributed grants to states, cities, and counties with populations greater than 200,000 to be used for back-due rent and utility bills accrued after March 13, 2020. Eligibility is limited to households that earn less than 80% of the area’s median income, as defined by the Department of Housing and Urban Development.

Applicants must document their incomes, prove they qualified for unemployment benefits or suffered financial hardship due to COVID-19 that impacted their ability to pay rent, and submit unpaid bills or notices that demonstrate they are at risk of becoming homeless.

What can landlords do?

Tenants and landlords generally apply for the funds together, but the application process and guidelines differ from program to program. In some states, landlords may be asked to forgive a percentage of the rental arrears in exchange for larger rent payments.

If you are a landlord, you might reach out to tenants who are behind on rent and encourage them to explore any potential opportunities for financial assistance. Check the websites of your state and local housing agencies to find the status and requirements of various housing programs and how to apply. Of course, many higher-earning households won’t be eligible for help, and in areas with lots of lower-income renters, local programs could run dry quickly.

Evicting tenants can be a painful and expensive process. If you have tenants who fell behind but are trying to catch up, it may be advantageous to work out a payment program instead to help keep them in place.


  1. Moody’s Analytics, 2021
  2. RealtyTrac, 2021
  3. The Wall Street Journal, March 11, 2021

Prepared by Broadridge Advisor Solutions. Copyright 2021.

Disclosure: BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s web site or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please see important disclosure information here.

Real Estate…A Terrible Investment?

The title might take many of you by surprise and this topic is not to discourage homeownership but is more geared to explaining why your home (and possibly other properties) may not be the best investment or why your home should not be viewed as an investment.

The primary focus of this article will be on your primary residence and not on rental properties. We are also going to assume that this is just an average community without any additional factors such as a gold rush, or a green rush, or an establishment as the next Silicon Valley. In those circumstances, real estate can outpace the national average. Do not forget the three things that matter in real estate is location, location, location!

The ability to use leverage (borrow money from the bank) is what attracts people to invest in real estate. When you buy the home you only have to put down 20% or less in some cases and the bank gives you a loan to pay on over the next 30 years (or whatever term you select). For example, purchasing a home for $500,000 in a traditional scenario requires 20% down ($100,000) and the bank provides a loan over 30 years for $400,000. With rates near historic lows (2.75%) the payment for this 30-year loan is about $2,041 per month.

The downside to using leverage is that it has a cost. Looking at the loan above ($400,000 loan at 2.75% interest for 30 years) you would pay over $187,000 in interest over the life of the loan! To put this another way, instead of buying the home at $500,000 you are paying $687,000 for the home ($500k purchase price + $187k interest paid). Owning a home is expensive and has many additional costs besides the loan. With a home, you have to pay property taxes, homeowner insurance, repairs, and potentially other costs like homeowner’s association (HOA) or mortgage insurance if your down payment is less than 20%. Below are the estimated costs for a $500,000 home in Orange County:

Source: Redfin

What we see is that the true cost of homeownership is much higher than we realize. The example above does not take into account any upgrades or repairs and maintenance the home may need as well. With the costs for owning a home so high, this lowers the actual investment return of the home.

We all know that home prices go up over time, but many people are not aware that the primary driver for the increase in home prices has been inflation.  If you look at the chart below, it shows since March 1999 until now real estate home prices (1) have grown 131.37% and stocks (2) have grown 342.27%.

Source: Bloomberg

Another factor that needs to be considered when looking into real estate as an investment is liquidity. Other investments like the equity and bond markets provide liquidity and you can have access to your money quickly. For real estate, this is not necessarily the case and it can be difficult to get your money back. If major employers move out of the area, you cannot quickly sell your home before home prices drastically shift downward.

Please understand we are not telling you to not buy a home. Homeownership is one of the biggest accomplishments one can achieve and provides security and stability for you and your family. We just caution against considering your primary residence to be considered an investment like many people recommend. Real estate is good as part of an overall portfolio but can be done in many ways in a more liquid manner. Please feel free to contact us to discuss how this article impacts your circumstances.

  1. U.S. Existing-Home Sales, National Association of Realtors (www.nar.realtor.com)
  2. The S&P 500 is designed to be a leading indicator of U.S. equities and is commonly used as a proxy for the U.S. stock market. Price return quoted.


Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Benefit Financial Services Group (“BFSG”), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from BFSG. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. BFSG is neither a law firm, nor a certified public accounting firm, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of BFSG’s current written disclosure Brochure discussing our advisory services and fees is available upon request

BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s web site or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please see important disclosure information here.

Plan Now Before Prop 19 Takes Effect

California is about to go through a dramatic change to real estate and property tax assessments with Proposition 19 (Prop 19) going into effect on February 16, 2021. Prop 19 replaces Proposition 58 (Prop 58), which has provided a favorable transfer of real estate from parent to child. It is important to understand these changes to see if you need to make any immediate changes to your real estate holdings before Prop 19 takes effect.

How do current laws work?

Currently, real estate with a low tax basis can be transferred during the parent’s lifetime or at death to a child and the child keeps the low basis and it does not trigger a tax reassessment. This rule applies to both primary residences and rental properties. The kids can live in the home or turn it into a rental and maintain the same low taxes the parents enjoyed. This transfer has unlimited value for a primary residence and “non-principal residence” (rentals or other homes) is limited to $1 million of assessed value per person. A married couple can transfer $2 million in assessed value. This means a property worth $3 million but a tax assessed value of $750,000 can be transferred to the children.

What changes with Prop 19?

Under Prop 19 any primary residence gifted to children will require the children to maintain that as their primary residence for the remainder of their life. If they turn the property into a rental or live in another home, that will trigger a tax reassessment on the property creating larger property taxes. The exemption amount is lowered to $1 million and applies ONLY to primary residences. The non-primary residence home exclusion is eliminated and will trigger a tax reassessment.


1. Primary Residence

Assume you bought a home twenty-five years ago and today it is worth $2.4 million but has a tax assessed value of $400,000. Under current law, the home can be transferred to your children during your life or at death and they will maintain the tax basis of $400,000 and can live in the home or turn it into a rental.

Under Prop 19, once the home is transferred to your children, one of them must live in the home immediately and maintain it as a primary residence indefinitely to avoid a tax reassessment. Since the home is worth more than the $1 million new exemption, it would trigger a new tax assessed value. The new tax assessed value would be $1.4 million ($2.4 million value – $1 million exemption) instead of $400,000.

2. Rental Property

Assume you bought a rental property twenty-five years ago and today it is worth $2.4 million but has a tax assessed value of  $400,000. Under current law, the home can be transferred to the kids and they maintain the $400,000 tax assessed value since a couple can use exemptions up to $2 million in tax assessed value.

Under Prop 19, the “non-principal value” exemption is eliminated so it would trigger a large tax assessment and the kids do not retain the $400,000 tax assessed value.

What should you do?

If you own a home in California with a low tax basis and would like to keep the property in the family, talk with us and your estate planning attorney today to explore if you should consider gifting the property before the February 16th deadline when Prop 19 takes effect. If you would like to contact us, please speak with your advisor or you can reach us at financialplanning@bfsg.com.