Pennsylvania Homestead Tax Relief

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The Taxpayer Relief Act was signed into law in June 2006 in the Commonwealth of Pennsylvania. This provision offers resident homeowners an opportunity to reduce property tax obligations through homestead and farmstead exclusions. The majority of Pennsylvania residents who own the home they live in qualify for the exclusion.

Qualifying Properties

Single-family homes, condominiums and farm homes are eligible for the Pennsylvania homestead exclusion. The property must be the permanent home of the owner. In other words, rental property and properties used solely for business do not qualify. In addition, if a homeowner owns more than one home, only the permanent home qualifies. Land on which the home is built is considered part of the homestead if the homeowner also owns the land.

School Districts Decide

Local school districts decide the amount of the tax exclusion. It is then up to the homeowners to have the property classified as an eligible homestead. Residents should check with the local property assessment office to see how to apply in their district. For example, in Chester County, the local school district mails residents an application. In Philadelphia, residents may apply over the phone.

Exclusion Amounts

All eligible homeowners within the same tax jurisdiction or school district get the same exclusion amount. That reduction is based on the median assessed value of all homes within the jurisdiction. Assessed value refers to the appraised value of property for tax purposes. The exclusion then can be as much as one-half the median assessed value. For example, if the median assessed value of all homesteads within a tax jurisdiction is $50,000, then the exclusion amount on property tax liability can be up to $25,000 for each homeowner.

How It Works

If the homestead exclusion were set at $25,000 by the local school district, then a home valued at $100,000 would be taxed as though the property was worth $75,000. An eligible homeowner would save 25 percent on the property tax bill. Depending on residence location, some Pennsylvania homeowners can save several hundred dollars through the exclusion. For self-proprietors and small business owners that use part of a residence for business purposes, the portion of the property used for business purposes must be considered, as this reduces how much exclusion the property owner can claim.

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