What Is The Difference?
A homeowner’s exemption is just a property tax exemption. The California state constitution provides for the exemption of up to $7,000 in assessed value from property tax assessment of any property owned and occupied as the owner’s principal place of residence. This means that the exemption removes up to $70 from your annual property tax bill. This may not seem like much, but it’s easy to obtain, and it adds up! There’s no reason to forgo the benefit.
In order to qualify for the exemption for property, you must be its owner or co-owner, and must use the property as your principle place of residence (Vacation homes don’t count!). Any place you own as your principle place of residence, and that is also subject to property tax, qualifies. You also have to file an exemption claim form with the County Assessor. Luckily, once the exemption has been granted, you won’t need to re-file the claim unless the title on the deed to the property changes.
There is one catch: if you plan to refinance your home, or plan to move your home out of (or into) a living trust, note that doing so may require you to change the title on the deed to the property. Each time you do so, you will have to re-file your exemption claim, to ensure that you continue to receive the exemption.
A homestead exemption, on the other hand, is an entirely different (and slightly more complicated) animal. It is a bankruptcy exemption intended to help protect people from losing their homes to creditors. If someone is sued for money and loses, the creditor can satisfy the amount of the judgment (translation: ensure they get paid) by selling assets belonging to the debtor, including the debtor’s home. The California homestead exemption protects the homeowner’s equity up to the amount of the exemption even if the home is sold. The point is to ensure that debtors and their families have some money remaining to invest in a new home, should their current home be sold involuntarily. The exemption applies to every person who lives in a dwelling; the dwelling can be a home, trailer, mobile home, boat, etc.
Click here for more details regarding Homestead Protection.