The exclusion reduces the taxable market value of qualifying homestead properties. By decreasing the taxable market value, net property taxes are also decreased.

For homesteads valued at $95,000 or less, the exclusion is 40% of the market value, creating a maximum exclusion of $38,000. The exclusion is reduced as property values increase and phases out for homesteads valued at $517,200 or more. 

Properties that are partial homesteads (for example, when only one of two owners lives there) will have a reduced exclusion.

Example 1: A residential homestead with an estimated market value of $280,000

Since this property has a value over $95,000 we need to determine the amount of value over $95,000. Next, we multiply that amount by 9% to determine the reduction from the maximum of $38,000. This example has an exclusion amount of $21,350.

Homestead Market Value Exclusion Calculation:

1. Initial/Maximum Exclusion: $95,000 x 40% = $38,000
2. Value over $95,000: $280,000 – $95,000 = $185,000
3. Benefit Reduction Amount: $185,000 x 9% = $16,650
4. Final Exclusion Amount: $38,000 – $16,650 = $21,350
5. Taxable Market Value: $280,000 - $21,350 = $258,650

As you can see, this reduces the property’s taxable value from $280,000 to $258,650.

Example 2: Residential homestead with an estimated market value of $350,000.

The value of the property has increased therefore the exclusion amount for this property will be reduced.

Since this property has a value over $95,000, we need to determine the amount of value over $95,000. Next, we multiply that amount by 9% to determine the reduction from the maximum of $38,000. This example has an exclusion amount of $15,050.

Homestead Market Value Exclusion Calculation

1. Initial/Maximum Exclusion: $95,000 x 40% = $38,000
2. Value over $95,000: $350,000 – $95,000 = $255,000
3. Benefit Reduction Amount: $255,000 x 9% = $22,950
4. Final Exclusion Amount: $38,000 – $22,950 = $15,050
5. Taxable Market Value: $350,000 - $15,050 = $334,950

As you can see, this reduces the property’s taxable value from $350,000 to $334,950.