What Are Homestead Exemptions?
Homestead exemptions protect your property from taxes and creditors.
Homestead exemptions are available in 48 states, notably Texas. If you live in one of the states that have these exemptions you can save you thousands in taxes.
Also, If your state has homestead protection, never put it into an LLC. Homestead protection is usually superior to what you can get from an LLC. But you may want to put it into a trust for estate planning purposes.
Every state that has homestead protections and exemptions will have different amounts for what they allow to be exempted. Whatever the exempt amount is, neither the IRS nor creditors can touch your property.
Let’s Look at an Example
If your homestead exemption is $100,000 and your house is $50,000, well then it makes sense to pay off your entire house because we know all that money is going to be protected from a lawsuit since the exemption tells us that no one can get to it.
However, if your house values $200,000 and your homestead is $100,000 then what we want to do is create a lien (harmless debt) against your property to cover that gap so you can pay less in taxes and be protected more from creditors.
Homestead Exemptions Can Be Superior to LLC Protections
If you live in a state which has homestead exemptions, you’re better off filing for those then an LLC. It will not only be cheaper (in most cases) but also more beneficial as far as property taxes go.
There are many ways to lower the value of your home and meet a homestead exemption limit. You could use a home equity line of credit and another bank loan or establish your own mortgage company.
These options aren’t as complicated or expensive as you might think, especially when it comes to establishing your own mortgage company.
Always Know What Your Homestead Protections & Exemption Limits Are!
They’re powerful, cheap to get and “old”. The homestead laws have been around for over a century, which means they’re not going anywhere. Remember, never transfer your property to an LLC if you live in a state with homestead laws.
If you’re interested in learning more about homestead protections & exemptions, call Royal Legal Solutions now to schedule your free consultation.