## Homestead exemptions in Illinois "Homestead exemption" actually refers to TWO different things — and people regularly confuse them: 1. **Property tax homestead** — reduces the taxable value of your primary residence (saving you money on your property-tax bill) 2. **Creditor-protection homestead** — protects equity in your primary residence from being seized by most creditors (in bankruptcy or judgment-collection scenarios) Both protect your primary home, but they serve completely different purposes — and qualify under different rules. ### Illinois property-tax homestead Standard $6,000-$10,000 homestead property-tax exemption (Cook County rules differ); senior, disabled, and veteran add-ons. ### Illinois creditor-protection homestead $15,000 (single) / $30,000 (married joint) creditor-protection homestead. ## How property-tax homesteads work Most states reduce the **assessed value** (or sometimes the actual tax) on your primary residence in one of these ways: - **Flat dollar reduction** — knock $25,000-$100,000 off the assessed value - **Percentage reduction** — exempt 25-50% of assessed value - **Frozen valuation** — cap how fast assessed value can rise per year (CA's Prop 13, FL's Save Our Homes, MD's 10% cap) - **Senior / disabled / veteran enhancements** — additional reductions for qualifying owners **To qualify:** - The property must be your primary residence (not a vacation home or rental) - You typically must own it (not rent) - You must apply, often once with re-application required if circumstances change - Some states have income or age limits for full benefits Application deadlines vary — March 1 (FL), April 1 (TX), and other state-specific dates. Late filing usually waits until next year. ## How creditor-protection homesteads work When a creditor wins a judgment, gets a tax lien, or pursues bankruptcy, the homestead exemption protects up to a state-defined amount of your home equity. The creditor cannot force a sale that would touch protected equity. **Example.** Your home is worth $400,000 with a $250,000 mortgage. Your equity is $150,000. If your state's homestead exemption is $100,000, a judgment creditor can force a sale to recover the $50,000 of unprotected equity. If the exemption is $200,000, you're entirely protected. **Three categories of protection:** - **Unlimited** — FL, TX, IA, KS, OK, SD, AR (within acreage limits) - **High dollar caps** — CA, MA, NV, RI, MN, AZ, MT, MI, OH - **Low dollar caps** — KY ($5K), NJ (no state exemption), PA (no state exemption), TN ($5-7.5K) **To qualify:** - Primary residence (most states) - Some states require recording a Declaration of Homestead (notably MA and NV) - Bankruptcy filers must satisfy a 730-day residency rule before claiming the local exemption ## What homestead protection DOES NOT cover Even unlimited-homestead states have exceptions: - **Mortgages** — secured creditors come first, regardless of homestead - **Mechanic's and tax liens** — typically prime over homestead - **Child support and alimony** — most states allow these to pierce homestead - **Federal tax liens** — IRS isn't bound by state homestead - **Criminal restitution and fines** - **Pre-existing judgments** — homestead exemption usually doesn't apply retroactively to debts incurred before the homestead claim was perfected - **Bankruptcy 'forum shopping' limits** — federal bankruptcy law caps homestead at $189,050 (2024) for property acquired in the prior 1,215 days ## How to claim each **Property tax homestead:** file the application form with your county tax assessor. One-time filing in most states; refile if you move. **Creditor-protection homestead:** automatic in most states once the property is your primary residence. Some (notably Massachusetts and Nevada) require you to record a Declaration of Homestead in the county land records. ## Common mistakes - **Forgetting to file the property-tax homestead** — states don't always automatically apply it - **Not refiling after a move** — when you sell and buy, you often need to re-apply - **Renting out the homestead** — converting to rental property typically forfeits both exemptions - **Multiple homesteads** — you can't have homestead protection on more than one property - **Not recording a homestead declaration where required** — particularly costly in MA where the difference is $375K of protection ## What you should do If you've recently bought a home in Illinois, file the property-tax homestead application at your county tax assessor's office NOW. If you're concerned about creditors (because of a judgment, business risk, divorce, or bankruptcy), talk to a Illinois real-estate or asset-protection attorney about how the creditor homestead applies to your situation. Most Illinois attorneys offer paid initial consultations on these issues. --- *This guide is general information about Illinois law as of early 2026 and is not legal advice. Homestead law has many edge cases (tenancy-by-the-entirety, joint ownership, change-in-residence rules, federal bankruptcy preemption) that change the analysis. Talk to a licensed Illinois attorney about your specific situation.*