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Laws that impact home ownership are often not well understood. Many homeowners may not be aware of an exemption that slightly lowers annual property taxes or the exemption that protects homeowners from a particular kind of creditor — the judgment creditor, a creditor who has sued an individual in court and obtained a legal judgment to collect money owed. A judgment creditor has the right to take several actions to collect the debt, including selling assets like real estate.

Homeowners’ Exemption: An Annual Savings on Property Taxes

The California Revenue and Taxation Code provides homeowners with a $7,000 reduction in the taxable value of a qualifying owner-occupied residence for purposes of computing the annual property tax assessment.1 With an approximate 1% property tax rate, the exemption provides roughly $70 in annual property tax savings.

To qualify for the homeowners’ exemption, the home must have been the principal residence of the owner as of January 1 of that tax year. A new owner will automatically receive an exemption claim form in the mail and there is no cost to file. To receive 100% of the exemption ($7,000), an owner must file by February 15. If the form is filed after February 15 but before December 10, an owner will receive 80% of the exemption ($5,600) for that year. Once granted, the homeowners’ exemption remains in effect until the title to the property changes or the owner no longer occupies the house as their principal place of residence.

Homestead Exemption: A Partial Equity Protection in a Home

The homestead exemption was designed to assure that a judgment debtor has a place to live even if they owe money to creditors by protecting a portion of the equity in a home in California from being used to pay a judgment lien on the property. As of January 1, 2021, the amount of the homestead protection is the greater of either (a) $300,000 or (b) the countywide median sales price for a single-family home in the calendar year prior to the calendar year in which the exemption is claimed, not to exceed $600,000. These amounts are adjusted annually for inflation, beginning on January 1, 2022, and are based on the change in the annual California Consumer Price Index for the prior fiscal year.2

Automatic Homestead vs. Declared Homestead

Currently, the California homestead exemption is automatic, meaning that a homestead declaration does not need to be filed with the county clerk. Under the new 2021 law, $300,000–$600,000 of a home’s equity cannot be touched by judgment creditors. However, the automatic exemption only protects the homeowner’s equity in the property under a forced sale due to the request of a creditor. If a homeowner chooses to sell their home, the mortgage lender will be paid first, followed by the judgment creditor, which can leave the debtor/homeowner without any remaining equity.
Additional equity protection is afforded for a declared homestead, a situation where a homeowner has filed a legal form with the county recorder declaring the qualified property. In a declared homestead exemption, the homeowner’s equity in the property will be protected whether the sale of the home is done voluntarily by the homeowner or involuntarily by a creditor through a forced sale.

Also, if a declaration is filed, the debtor/homeowner can voluntarily sell the home and keep the net proceeds up to the homestead amount after the mortgage lender is paid but before the judgment creditor is paid. The proceeds will be protected for a full six months or indefinitely if the homestead amount is invested in a replacement home during the six-month period that follows the sale.3 Filing a declaration may be a good idea for anyone with equity in a home.

Limitations of the Homestead Exemption

The following are some additional limitations of the homestead exemption:

  1. If the home is used as collateral for a loan (e.g., mortgages, deeds of trusts, taxes) the lender retains the right to foreclose on the property and the borrower will not qualify for the homestead exemption.
  2. If the home is used as collateral for a loan (e.g., mortgages, deeds of trusts, taxes) the lender retains the right to foreclose on the property and the borrower will not qualify for the homestead exemption.
  3. With the automatic homestead, homeowners who choose to sell their homes are not protected from judgment creditors; the homestead exemption only applies when the sale is forced by the creditor.

How to File a Homestead Exemption

A homeowner must file for the homestead exemption with the correct county recorder’s office. An example of a form can be found at the following link:

Additionally, if you are interested in learning more about the homeowners’ or homestead exemption laws, please contact a member of your B|O|S wealth management team.


1 California Legislative Information, “Revenue and Taxation Code, section 218,”

2 California Legislative Information, “Assembly Bill No. 1885, Chapter 94,” As of January 1, 2021, Assembly Bill No. 1885 became law and amended Section 704.730 of the California Code of Civil Procedure.

3 California Legislative Information, “Code of Civil Procedure, section 704.960,”

Cerity Partners LLC (“Cerity Partners”) is a registered investment adviser with oices in California, Colorado, Florida, Illinois, Ohio, Michigan, New York, Massachusetts, and Texas. Registration of an Investment Advisor does not imply any level of skill or training. This commentary is limited to general information, and should not be construed as personal tax, legal, or investment advice. There is no guarantee that the views and opinions expressed in this piece will come to pass. The information is deemed reliable as of the date of this commentary, but is not guaranteed, and subject to change without notice. It should not be considered as an offer to sell or a solicitation of an offer to buy any security.

Meet the Author

Judith Gordon


Judy is a Principal based in the Silicon Valley office. She provides consulting advice for private clients and advisors on estate planning, wealth-transfer strategies, d trust and estate administration, and charitable planning. With her extensive law background, Judy works collaboratively with clients and their tax advisors and estate planning attorneys to ensure that their strategies are consistent with their overall financial and estate plans and to manage, preserve, and grow their wealth for their family and philanthropic goals.

Prior to joining Cerity Partners, Judy worked as an Estate Planning Advisor at B|O|S and served as a member of the Financial Planning Team. In this role, Judy helped clients navigate significant life changes, minimize their tax burden, and identify goals and strategies for legacy planning. Prior to joining B|O|S, she enjoyed a 35-year legal career in sophisticated gift and  estate tax planning, charitable planning, and probate and trust administration.

Judy earned her Bachelor of Arts in Psychology from the University of Florida and her Juris Doctor degree from Georgetown University. She also received her Master of Laws from New York University.

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