A homestead tax credit is a property tax discount offered to residents who own properties in many states. The specific qualifications and amounts of the tax credit vary from one state to the next.
Tax Credit Basics
The homestead credit is an incentive to own property. Similar to subsidies granted to companies that establish new businesses in a community, the homestead credit reduces the property taxes and costs of home ownership. In some states, most residential property owners quality for the homestead credit. In others, you must meet a variety of requirements to qualify.
According to Iowa's Des Moines County website, anyone who owned and occupied a home for at least six months in a calendar year in the county qualifies for a homestead credit. As of 2015, however, the credit is based only on the first $4,850 in property value. In Michigan, requirements are a bit more stringent. Along with the same time and residential guidelines, your property's tax value can't exceed $135,000 and your yearly household income can't exceed $50,000 to qualify. Wisconsin has a number of additional age, income and tax restrictions for applicants, including a household income at or below $24,680 as of 2014, and no use of Title XIX medical assistance.
Some states, including Michigan, preclude you from receiving a homestead credit if you get 100 percent of your income from state assistance.
Specific application procedures and locations are typically found on each state's department of revenue website. In Iowa, the application is available online, and includes just one page requesting personal and property details. Michigan also offers its application online, though it is a bit longer and more in-depth. In Michigan, you mail the completed application to the Michigan Department of Treasury. Assuming you meet the qualifications and your application is approved, your credit is applied to your annual property taxes.
Typical Credit Amount
Approaches to calculating a homestead credit and amounts can vary greatly. In Maryland, the credit is 1 percent of the increase in taxable property value up to a $10,000 limit. Thus, as of 2015, the maximum credit is $104. In Minnesota, the regular credit is based on household income and property value. The state also offers a special credit for properties that experience increases in taxable value, with a $1,000 maximum credit.