Calculate your tax break from the homestead exemption
The Town Council will vote Monday on a homestead tax exemption. The only question is what percentage it will set. Under state law, the exemption can be between 5% and 35%.
On a home assessed at $100,000, a 15% exemption reduces the assessment to $85,000. Your taxes are based on the lower assessment.
It’s not clear what percentage the council will set. At 20%, the exemption should wipe out any tax increase from revaluation for many homes. It may be enough to allow the town to increase spending by 3% with little tax impact on qualifying homes. But don’t be surprised if the council sets a 35% exemption. That could mean a significant tax cut.
It's also possible that the council could start at a lower exemption, say 15%, and increase it year by year.
Who qualifies
Homes that are owner-occupied qualify. That includes single-family houses, condos and two-family houses where the owner lives in one unit. Rental houses, apartment buildings, and commercial property do not qualify.
State law lets towns add a length-of-residency requirement or a cap on home value. The resolution before the council includes neither.
You have to apply
The exemption is not automatic. You have to apply. The may set a deadline of Dec. 31 -- if the homestead exemption is approved. You apply once, not every year.
Failure to apply could be costly. Because the homestead exemption reduces the taxable property base, it can result in a higher mill rate for everyone. Homeowners who don't apply would pay that higher rate on their full assessment. At a 20% exemption, a home assessed at $200,000 would pay about $4,366 with the exemption and $5,458 without it — a difference of nearly $1,100 annually. At a 35% exemption, the difference could be about $2,100. This excludes fire district and motor vehicle taxes.
Using the calculator
Enter your old assessment and your new assessment. Then choose an exemption, from none to 35%. The last line shows what you would pay if you don’t apply.
The town budget line shows what your tax bill may look like if the council adopts a budget next year with a 3% increase.
The law allows the town to require a minimum length of residency to qualify for the exemption. Such a requirement is not included in the resolution the council is considering. (Full disclosure: I wrote to the council urging it not to adopt one. A residency requirement would be profoundly unfair to new buyers, who are often younger than established owners. There is no justification for that disparity.)