A homestead property exemption, also known as a homestead tax exemption, is a legal provision that protects up to a certain dollar amount or percentage of a homeowner’s equity from creditors. In general, the homestead exemption will usually only apply to an individual’s primary residence and only if they meet the specific qualifications.

Homestead exemptions were originally created to provide shelter and support to a surviving spouse after the death of the other spouse and the loss of that spouse’s income. Today, however, the main purpose of a homestead exemption is to ensure that a debtor and the debtor’s family can protect the equity interest in their home from being taken by creditors after a declaration of bankruptcy.

For example, if you file for Chapter 7 bankruptcy in Vermont, then you may be eligible to claim a homestead exemption of up to $125,000 on your primary residence. This means that if you own your house in full (e.g., no mortgage or other financial claims on it), then up to $125,000 of your home equity can be protected from creditors.

Can Anyone Claim a Homestead Exemption?

Not everyone will be eligible to claim a homestead exemption. In general, a homestead exemption can only be claimed by persons who are declaring bankruptcy and/or after the death of a homeowner spouse. Furthermore, this will only be possible if their state permits homestead exemptions. While most states grant homestead exemptions as an automatic right to persons who fall under either category, not every state allows them.

For example, neither Pennsylvania nor New Jersey offer homestead exemptions, and Kentucky limits its homestead exemption to $5,000 for each person who files. A married couple filing together can protect up to $10,000. Thus, it is crucial that an individual reviews their state’s laws on homestead exemptions.

In addition, homestead exemptions normally only apply to a person’s primary residence. Although some states may allow individuals to claim the exemption for houseboats and trailer homes that satisfy certain size requirements, the majority of them do not permit exemptions for property that is not considered a person’s primary residence. Therefore, a second home or a vacation home may not be eligible for the exemption in some states.

How Much Is a Homestead Exemption Worth?

As discussed above, the percentage of value that a homestead exemption will cover will depend on the laws of each state. In some states, an individual may be able to choose between the exemption provisions in their state or the provisions of the federal exemption system.

The federal homestead exemption is set by federal law and adjusts every three years for inflation. For cases filed between April 1, 2025, and March 31, 2028, the amount is $31,575. So a person using the federal system can protect up to $31,575 of equity in their primary home. Because this figure changes on a set schedule, check the current amount before you file.

As for individuals who chose to use their own state’s exemption system or for states that require their residents to follow state exemption provisions, the amount will vary by state, but is usually determined by the following general factors:

  • The number of persons living in a household;
  • Whether the person claiming the homestead exemption is married or single;
  • The income of the person who is considered the head of a household; and
  • Whether the primary residence is located in a rural, suburban, or urban area.

In addition, a minority of states (e.g., Texas, Florida, Iowa, etc.) permit homeowners to exempt an unlimited amount of their home or property that falls under the definition of their state’s homestead exemption. This method diverges from the standard formula that is used to calculate homestead exemption amounts (e.g., exempting a portion of the home as a fixed tax discount, with the remaining value of the home being taxed at a normal rate).

For instance, California’s homestead exemption is now much larger than it used to be. As of 2025, it protects between about $361,000 and $722,500 of home equity, based on the median home price in your county. The amount also rises each year for inflation. So if a California homeowner has $300,000 of equity in their home, they could protect all of it from creditors when they file for bankruptcy.

What Is a Domicile Requirement?

As previously mentioned, some states offer better homestead exemptions than others. This fact caused people to start purchasing homes in states with more favorable homestead exemption amounts in order to shield a larger portion of their assets. For example, New York only provides a homestead exemption of up to about $204,825 in its highest-cost counties, whereas Montana allows for an exemption of up to $409,450 as of 2025.

Once the federal government realized this was happening, they enacted a federal law that placed a domicile requirement on the homestead exemption. What this means is that in order for a person to qualify for their state’s homestead exemption, they must have purchased the primary residence they are claiming at least 40 months prior to filing for bankruptcy.

If the person does not satisfy the domicile requirement, then federal law will place a limit on the amount of the homestead exemption they can claim. This is true regardless of what the set amount is in their state’s homestead exemption provision.

What Does a Homestead Exemption Not Protect?

It should be noted that the homestead exemption does not protect a person’s primary residence from all creditors. For example, it will not prevent a secured creditor, such as a bank, from recovering and foreclosing on a home if the person is late on mortgage payments and the bank is the mortgagee. Thus, if a homeowner’s equity exceeds the amount that they owe in mortgage payments, then the bank may force them to sell to recoup the proceeds.

However, the bank may not force them into a foreclosure sale if they hold equity that is less than the amount they owe on the mortgage. The homestead exemption will also protect a homeowner from unsecured creditors who attempt to get them to sell their home in order to satisfy their remaining debts.

Another item that will not be protected under a homestead exemption is a mechanic’s lien. Additionally, Court orders to pay child support or alimony will also not receive protection under these exemptions.

Should I Hire an Attorney for Help with a Homestead Issue?

As is evident from the above discussion, issues concerning a homestead exemption can be very complicated. Their requirements vary drastically by state and may also involve compliance with certain federal requirements, depending on which system you can or choose to follow when declaring bankruptcy.

Also, if you do not own a traditional home, it can sometimes be difficult to interpret what types of property qualify under a state’s home exemption provisions.

Therefore, if you have any questions or are running into issues with the homestead exemption in your state, you should speak to a local property lawyer immediately for further advice. An experienced property lawyer will be able to explain how the homestead exemption applies in your state and can assist you in filing a claim to protect your assets if your state does not grant its residents an automatic right to such exemptions.