There are two kinds of homestead exemption in Georgia. One is the exemption that lowers a homeowner's property tax bill. The other protects creditors from taking the home in bankruptcy.
Property Tax Exemption
Homes in Georgia are taxed on 40 percent of the fair market value. A $100,000 home, for instance, has a taxable value of $40,000. The standard homestead exemption subtracts $2,000 from that: on a $100,000 house, that reduces the taxable value to $38,000. That figure, multiplied by the property tax rate, gives the tax bill.
The standard exemption is available to any homeowner who meets the ownership and residency requirements. It applies to state, county, and school district taxes, with some exceptions, such as taxes used to retire bond debt.
There are other homestead exemptions available. For example:
- A homeowner 65 years or older can claim a complete exemption from state property taxes on his home and up to 10 acres of land.
- A disabled veteran gets a $60,000 exemption applying to all property taxes, plus an added amount set by the federal government.
- The spouse of a police officer or firefighter who died in the line of duty gets a complete exemption as long as she doesn't remarry.
Exemption values and rules can change if the government changes its policies. Local tax authorities or the DOR website can provide current information. The Georgia DOR also has an online county-by-county guide to property taxes.
Freeze the Value
More than 20 counties in Georgia offer another exemption -- as long as you live in the house, the taxable value stays the same, even if the property value goes up. This can apply to city, county or school taxes, subject to whatever qualifications each county chooses to set.
Contact the county tax assessor about whether you can apply for more than one exemption. Cobb County, for instance, allows you to apply for all exemptions you think you qualify for. Chatham County says online that you can only apply for one, though you can choose whichever offers the best tax break
The Bankruptcy Exemption
Homestead exemptions are important to homeowners trying to save on property taxes. If a homeowner has to file bankruptcy, a homestead exemption can be vitally important too — but bankruptcy's homestead exemption is different from the tax exemption, and governed by different laws.
At time of writing Georgia allows you to exempt up to $21,500 in home equity from sale in Chapter 7 bankruptcy, or $43,000 if you and your spouse file bankruptcy together. Equity is the value of your home that exceeds the mortgage.
In Chapter 7, the court can sell your house and other assets to pay your creditors. The home sale pays off your mortgage first, with any remaining funds going to your other creditors. Suppose, however, you have a $90,000 mortgage and $15,000 in equity. The equity is less than the exemption, so your creditors get nothing. There's no point to selling the house, so the court will let you keep it.
In Chapter 13, you spend several years paying back your creditors before the court discharges your remaining debts. The court won't sell your house, but exemptions still matter. To qualify for Chapter 13, your payment plan must give creditors at least as much as they'd receive in Chapter 7. As the homestead exemption reduces the payoff in Chapter 7, it makes it easier to qualify for Chapter 13.