What is a homestead exemption and how does it reduce property taxes?

A homestead exemption reduces the taxable assessed value of an owner-occupied primary residence, lowering the property tax bill. The exemption amount and eligibility vary by state. Some states offer a fixed dollar exemption, such as subtracting 50,000 dollars from the assessed value. Others offer a percentage reduction. Many states provide enhanced exemptions for seniors, veterans, disabled persons, and surviving spouses. The homestead exemption typically applies only to the owner's primary residence, not to investment properties or second homes.