If you own property in Alabama and meet some other requirements, you may be eligible for a Homestead Exemption. This exemption gives you a break on your property taxes, but it isn’t automatic. You’ll need to determine what you qualify for and then apply for it.
Alabama’s Property Taxes
The property tax year in Alabama runs from October 1 through September 30, and property owners pay taxes a year in arrears, meaning you’re charged for the year that just ended. Your property taxes are due on Oct. 1, and the bill is sent to the owner of record for the property on Oct. 1 of the prior year.
If you purchased a property during the past year, you would be responsible for paying the bill, even if it doesn’t have your name on it. It is also your responsibility to pay the bill even if one isn’t mailed to you.
This all sounds fairly confusing, but one thing that is simple is saving money on your property taxes if you meet certain requirements. Anyone who is eligible should apply for the Homestead Exemption.
Types of Homestead Exemptions in Alabama
According to Alabama law, there are four different types of Homestead Exemptions. You should apply for the one that gives you the most benefits provided you meet the qualifications. The basic requirements for all four of these exemptions are as follows:
The homeowner must be a citizen of Alabama that owns and occupies a single-family residence, including manufactured homes. It must be your primary residence, and the property is not used for other purposes, such as a business.
Homestead Exemption 1 is equal to $4,000 of the assessed value in state taxes as well as $2,000 of the assessed value for county taxes.
Homestead Exemption 2 is available if the homeowner is legally blind (“20/200”) or ages 65 or older with a $12,000 or lower annual adjusted gross income as reflected on their most recent State Income Tax Return. It is also available (regardless of age) if you are retired due to permanent and total disability. The exemption is equal to all state and county taxes up to $5,000 in assessed value. If claiming this based on disability, proof must be submitted.
Homestead Exemption 3 is available if the homeowners are ages 65 or older with $12,000 or less in combined taxable income on their latest Federal Income Tax Return. It also applies if you are retired due to permanent and total disability. This exempts you from all ad valorem taxes, and you must prove disability.
Homestead Exemption 4 is available if the homeowners are ages 65 or older with $12,000 or more in combined taxable income on their latest Federal Income Tax Return and $12,000 or higher annual adjusted gross income as reflected on their most recent State Income Tax Return. You would receive an exemption equal to $2,000 of the assessed value in county taxes and the state portion of ad valorem taxes.
Exemption applications must be made by December 31 and any Exemptions granted based on age or disability must be granted annually.
What Does Alabama Mean by “Residential Property”?
According to the Alabama Code, “residential property” is real property used by its owner exclusively as a single-family dwelling. Having your home qualify as “residential property” is essential to getting the lowest property tax rate.
Some of the things that the state uses as a “test” for this qualification include:
- The homeowner pays all utilities at the property as of Oct. 1;
- The homeowner or an immediate family member were the only ones living at the property, and it was not used to produce income;
- The homeowner was maintaining the property as of Oct. 1;
- The homeowner lived at the property or stayed there overnight; and
- A Homestead Exemption was filed for the property.
Speak with a Qualified Alabama Real Estate Attorney
While the basic Homestead Exemption might seem straightforward enough, there are enough nuances to these different laws to make things confusing. Anyone who wants or needs to apply for Homestead Exemptions 2-4 could certainly run into some roadblocks. Likewise, a governing body might want to argue that your home doesn’t meet the definition of a “residential property.”
If you run into difficulty with your Homestead Exemption, have questions about a real estate matter, or need the assistance of an experienced Alabama real estate attorney, contact the law offices of Davis, Bingham, Hudson & Buckner, P.C., to learn more about how we can help.
For a consultation with one of our qualified real estate attorneys, call us at 334-821-1908, reach out to us online, or stop into our Auburn office today.