Homestead exemption.

In plain English

A homestead exemption is a break some states and counties give homeowners on the property they use as their main residence. It works by subtracting a set amount from your home's assessed value before the tax rate is applied, so you are taxed on a smaller number. Some states also use a homestead protection to shield part of your home equity from certain creditors. The rules, dollar amounts, and whether you have to apply vary a lot by state, so this is something to confirm where you live.

01Why it matters

If your state offers it and you never apply, you can overpay property tax every year on a benefit you were entitled to the whole time.

02The math, step by step

Imagine your home is assessed at $250,000 and your state offers a $40,000 homestead exemption. You would be taxed as if the home were worth $210,000. At a 1.2 percent rate, that is about $480 less in tax that year. Exemption amounts and eligibility vary by state, so check your county or state tax office for the amount and rules where you live.

03What this is NOT