How to Save on Your Existing Mortgage Part 3: Taxes

Although the idea may seem unbelievable, we were able to save on taxes associated with being a homeowner.

We moved into our first home fairly recently and, up until the end of last year, we were unaware that we were eligible for a Homestead Exclusion.  Every year our county sends out a notice to homeowners who have not yet applied for the Homestead Exclusion and includes an application.  I recall reviewing it last year and assumed that we were ineligible because, quite honestly, I didn’t consider our home to be a “homestead.”  It just kind of sounded silly, and I thought they were referring to homes that had farms, like little house on the prairie.

In any case, I was wrong — we are in fact living in a property which qualifies as a homestead in PA, and our county is one that participates in property tax reductions for permanent residents.  From Penn State’s PA Homestead FAQ:


A homestead property is a dwelling primarily used by an owner as their permanent home. The owner may temporarily be living at another location, but he or she must have the intention of returning to that home. No one can have more than one permanent home at any one time. Homestead properties do not include rental units, vacation homes, camps, or other homes in which the owner does not live on a permanent basis. In general, it is the address where you have registered to vote and have registered your drivers license.

The homestead property includes the land under the dwelling, as long as it is owned by the same person who owns the dwelling. The formal definition is the same used for determining residence status for the earned income tax.

See the following homestead exclusion example table for PA.  It is estimated that 100,000 eligible homeowners have not yet applied for homestead exclusion.  Note that the deadline for exclusion comes annually on March 1.   Although, once you apply and are approved, you need not apply again unless you move.

You might not live in PA.  However, I found a brief comparison of the property and income tax reductions allowed only for resident taxpayers in each state.  The document indicates that there are more than 20 states that offer assessment reduction.

I encourage that you share your out-of-PA tax-reduction knowledge in the comments.  If there are an estimated 100,000 who don’t take advantage of value-assessment tax reductions in PA alone,  there are probably close to 1,000,000 homeowners across all of the other states who are missing an opportunity to save on their taxes.

Ultimately, for us, our reduction in PA is determined on an annual basis.  I spoke with my local tax office to see what we might expect to save and was told that all tax payers saved a bit over $200 last year.  Our total property tax savings will be around $16.67 per month due to the Homestead Exclusion.

This post is part of the How to Save on Your Existing Mortgage Series:

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