A homestead exclusion lowers property taxes by reducing the taxable assessed value of the home. For example, if a home is assessed at $50,000 and the homestead exclusion is $5,000, then the homeowner only pays taxes on an assessed value of $45,000.
A homestead must be a Pennsylvanian's permanent primary residence on which property taxes are paid. Included with the term "homestead exclusion" is "farmstead exclusion."
A farmstead exclusion provides property tax relief to farmers. A farmstead applies to buildings used for agricultural purposes on a farm that is at least 10 contiguous acres. The farmstead must also be the primary residence of its owner. Farmers can be eligible for both a homestead exclusion and a farmstead exclusion since each covers a different part of the property.
To receive a homestead or farmstead exclusion, a Pennsylvania resident must submit an application to the county assessment office.
School districts are required to send an application to all owners of residential property in the school district by December 31 each year; however, annual notification may be limited to owners of residential property not currently approved as a homestead or whose approval is due to expire.
Homestead exclusion applications are due by March 1. Homeowners cannot be required to resubmit their application more than once every three years. Residents that acquire property in the school district after the March 1 deadline must wait until the following year to qualify for a homestead or farmstead exclusion.
The county assessor must notify the property owner of the approval or denial of the homestead or farmstead exclusion no later than 30 days after receipt of the application.
SS Act 1 only applies to residential property owners. Pennsylvanians in 66 counties will receive property tax relief through homestead and farmstead exclusions.
In Philadelphia, the state funding for tax relief will be used to reduce wage taxes instead of property taxes. Wage taxes will be reduced for both resident and commuter wage taxpayers. Scranton School District has the option of using up to 50% of its property tax reduction allocation to reduce the rate of its earned income and net profits tax.
The extent of property tax relief in a particular school district will depend on whether the taxpayers in the school district approve a local income tax increase and whether the school district accepts its state allocation of revenue from expanded gaming.
The amount of property tax relief will vary from one school district to another. The property tax relief formula is designed to take equity into account – sending the most state resources to the communities with the greatest tax burden and least local wealth.