What Is a Homestead Exemption and Why Should You Care?

Let’s talk about the homestead exemption. It’s one of those legal terms that sounds like something out of a dusty property law textbook, but it can play a huge role in protecting homeowners—and yes, that includes you.

Originally created in 1862 to encourage westward expansion and support small farmers, the homestead exemption has evolved into a practical tool that helps people hold on to their homes and reduce their property tax burden.

So whether you’re buying your first home or have been living on a plot of land that’s been in the family for generations, it’s worth understanding how this little piece of law could make a big impact.

What Is a Homestead Exemption?

In simple terms, a homestead exemption is a legal provision that offers financial protection for your primary residence. Depending on the state you live in, it can:

• Protect the Equity in your home:

  • The exemption protects the equity you have in your primary residence, up to the specified limit. 

    
    

• General creditor claims:

  • It shields your home from seizure and sale by creditors like those arising from medical bills, credit card debt, personal loans, or accidents. 

• Bankruptcy:

  • Filing for bankruptcy does not remove the protection offered by the homestead exemption. 

What the Homestead Exemption Does NOT Protect:

• Debts secured by a mortgage or deed of trust: If you have a loan secured by your home (like a mortgage or home equity loan), the lender can still foreclose if you don't pay.

• Property taxes: The government can still foreclose if you don't pay your property taxes.

• IRS liens: The IRS can still pursue collection actions, including liens on your property.

• Mechanic's liens: If you hire someone to work on your home and don't pay them, they can file a lien against your property.

• Child support or alimony: These obligations are not covered by the homestead exemption. 

But before you go thinking your home is untouchable, there are a few key things to know.

Not All States Play by the Same Rules

Homestead laws vary significantly depending on where you live. Some states (like Florida and Texas) offer broad protections that prevent creditors from forcing the sale of your home, regardless of its value—as long as you meet certain conditions. Other states have much lower limits on the amount of equity that can be protected.

In some states, you’re automatically covered. In others, you’ll need to file paperwork to claim the exemption. And yes, if you move out and stop using the home as your primary residence, you can lose the protection.

What About Nevada?

If you live in Nevada, here’s the good news: the state allows homeowners to protect up to $605,000 of equity in their primary residence. That means creditors can’t touch the first $605,000 of your home’s value beyond your mortgage or other financial claims.

Nevada also offers property tax reductions under its homestead exemption. To take advantage of it, you’ll need to file a Declaration of Homestead with your county recorder.

One more thing: if you’re filing for bankruptcy in Nevada, you’ll be using Nevada’s state exemptions (not federal ones). However, you can stack in federal nonbankruptcy exemptions where applicable.

And if you haven’t owned your home for at least 1,215 days before filing bankruptcy? Your exemption might be capped at a lower federal limit of $189,050.

Are There Any Downsides?

As helpful as homestead exemptions are, they’re not without fine print. Here are a few common drawbacks:

• Selling or transferring restrictions may apply, making it harder to offload your property quickly

• Property size limitations could impact people with large rural properties

• Income caps in some states may exclude certain homeowners from eligibility

• Limited availability depending on where you live

• Public funding impact since reduced taxes mean less local revenue

• Reassessed property values can increase taxes over time, especially in growing markets

Always double-check with your state and local laws before making any decisions. Homestead exemptions can be a great tool—but like most things in estate planning, they’re not one-size-fits-all.

Want to Learn More?

Head over to High Sierra Legal’s YouTube Channel for more helpful breakdowns on estate planning, homestead protections, and all the legal stuff no one teaches you in school.

Got questions about how this fits into your estate plan? Let’s talk.