Pa homestead farmstead program

It allows certain properties, such as homes, to receive preferential treatment under the real property tax, reducing the owner's taxes. The November vote changed the constitution to permit the General Assembly to pass legislation implementing the homestead exclusion. Passage of the Homestead Property Exclusion Program Act in May, Act 50 of , provided implementing language and rules for how the homestead exclusion can be used in your school district, county, and municipality township, borough, or city.

Homestead exclusions and a similar exclusion for farm properties, called the farmstead exclusion, now can be made by school districts, counties, townships, boroughs, and cities. Under Act 50 of , a taxing jurisdiction school district, county, or municipality can implement homestead and farmstead exclusions without any change to the existing local tax structure, as long as the jurisdiction can pay for them without increasing real property taxes.

The law also provides a mechanism for school districts to change their local tax structure by relying more upon an earned income tax, and in exchange reducing the real property tax and eliminating several nuisance taxes the per capita, occupation, and occupational privilege taxes.

School districts making this change are required to use the homestead and farmstead exclusions to make these real property tax reductions. This bulletin was developed to help you understand the homestead and farmstead exclusions, what they do, how they can be implemented in your community, and how you would apply to receive the exclusions for your own property.

Because the homestead and farmstead exclusions are not necessarily tied directly to the school tax changes in Act 50 of , this leaflet does not attempt to address local tax reform issues, except where they may relate to the exclusions.

The homestead exclusion is a way to target real property tax relief to homeowners who have their permanent residence in the taxing jurisdiction school district, county, or municipality. The homestead exclusion reduces the assessed values of homestead properties, reducing the property tax on these homes. The homestead exclusion provides the same dollar tax reduction to all eligible properties in the taxing jurisdiction, including houses on farms, condominiums, single family homes, and other places of permanent residence owned by the occupant.

The homestead exclusion allows homeowners real property tax relief of up to one half of the median assessed value of homesteads in the taxing jurisdiction county, school district, city, borough, or township. The actual exclusion allowed will be set by the school district. All homestead properties in the school district will receive the same size exclusion, which will reduce each taxpayer's school real property tax bill.

A homestead property is a dwelling primarily used by an owner as his or her permanent home. The owner may be living temporarily 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 the owner registered to vote and has registered his or her driver's 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 of property is the same as that used for determining residence status for the earned income tax.

The recently passed school tax reform bill Act 50 of allows school districts to shift the school tax burden from the real property tax to the earned income tax. Under Act 50, school districts can choose to levy a higher earned income tax rate, and in exchange must use these additional revenues to eliminate nuisance per capita, occupation, and occupational privilege taxes and reduce the real property tax. More of the school tax revenue required locally will come from the earned income tax, and less will come from the real property tax.

The homestead exclusion is intended to target real property tax relief to homeowners, to ensure that the real property tax reductions go first to those who own their own dwellings. The farmstead exclusion is a similar method of targeting real property tax relief to farmers. It lowers the taxes farmers pay on farm buildings other than the farm house, which receives tax breaks through the homestead exclusion , as long as at least one farm owner lives on the farm.

The farmstead exclusion allows farmers real property tax relief similar to that provided to homeowners by the homestead exclusion. By law, if a homestead exclusion is offered in a taxing jurisdiction county, school district, city, borough, or township , the farmstead exclusion also must be offered. The farmstead exclusion is set by the governing body and cannot exceed the amount of the homestead exclusion.

A farmstead property includes all buildings and structures that are used primarily for agricultural purposes such as housing animals or storing supplies, production, or machinery on a farm of ten contiguous acres or more in size. The farmstead must be the permanent residence of at least one owner, as defined under the homestead definition.

The farmstead exclusion would be applied to buildings and structures that are not already exempt from real property taxation under other laws. The requirement that an owner live on the farm means that farms owned and operated by absentee owners will not be eligible for the farmstead exclusion. The farmstead exclusion is intended to target some additional real property tax relief to farmers, who also argue that the real property tax is particularly unfair to them. Compared to other local businesses, some argue, farmers pay an unfair amount of local taxes.

Unlike other local businesses, the majority of a farm's productive assets land and buildings are subject to local taxation through the real property tax.

This isn't true for most nonfarm businesses, whose productive assets are nontaxable items such as machinery, inventory, and office equipment. Compared to businesses of the same size in their own communities, farmers thus can owe much more in real property tax. In addition, as for other taxpayers, the amount farmers owe in real property tax is not directly related to their ability to pay those taxes.

The taxes are based on the value of the land, including its speculative value for development, and not on the value of what farmers can make from farming that land. The amount of real property tax owed by any taxpayer is the tax rate measured in mills multiplied by the assessed value of his or her property see Example 1. If the assessed value of the property is made smaller, the amount of the tax owed will be smaller.

The homestead exclusion will be based on and will change assessed values, not market values. Market values are the price at which a property would sell with both a willing buyer and seller. Assessed values are the values used in calculating real property taxes, and always are calculated as a percentage of market value.

The percentage used on all properties in a county to calculate assessed values is set by the County Board of Assessment Appeals during reassessment, and is called the assessment ratio. Unless the property itself is changed in some way that affects its market value, through either physical improvements or demolition, this assessed value will not be changed or recalculated until the next reassessment occurs.

In general, the homestead and farmstead exclusions are implemented in a taxing jurisdiction by action of the local elected officials. Initially, they must decide to implement the exclusions and most importantly decide how to pay for them. The Homestead Property Exclusion Program Act specifically prohibits raising real property tax rates to pay for the homestead or farmstead exclusions, so another source of revenue must be found.

For most jurisdictions, this will be possible only through tax reform, because they will need substantial new revenues to pay for the exclusions. Some jurisdictions with a major budget surplus may be able to implement the exclusions as well. School districts also can implement the homestead and farmstead exclusions by adopting the new local tax structure under Act 50 of , which shifts the local tax burden from the real property tax to the earned income tax.

Real property tax reductions resulting from school tax reform in Act 50 of must be accomplished through the homestead and farmstead exclusions. Depending upon how much additional revenue a school district receives from changing its earned income tax, the school district also may have to reduce real property tax millage rates if its new homestead and farmstead exemptions would exceed the constitutional limit of 50 percent of the median assessed value of homestead properties in its jurisdiction.

The homestead for real property qualifying under this paragraph shall be the portion of the real property that is equal to the portion of the dwelling that is used as the domicile of an owner.

A farmstead is defined as all buildings and structures on a farm not less than ten contiguous acres in area, not otherwise exempt from real property taxation or qualified for any other abatement or exclusion pursuant to any other law, that are used primarily to produce or store any farm product produced on the farm for purposes of commercial agricultural production, to house or confine any animal raised or maintained on the farm for the purpose of commercial agricultural production, to store any agricultural supply to be used on the farm in commercial agricultural production or to store any machinery or equipment used on the farm in commercial agricultural production.

This term shall only apply to farms used as the domicile of an owner. Under a homestead or farmstead property tax exclusion, the assessed value of each homestead or farmstead is reduced by the same amount before the property tax is computed. Homeowners are not guaranteed a homestead or farmstead exclusion unless and until an additional income tax for purposes of granting a homestead or farmstead exclusion is approved by voter referendum or sufficient funds have been collected to permit property tax reduction allocations to be made by the Commonwealth.

To receive school property tax relief for tax years beginning July 1 or January 1, an application for homestead or farmstead exclusions must be filed by the preceding March 1. To offset the loss is property tax revenue, Act 1 provides for an increase to the Earned Income Tax or switch to a Personal Income Tax at the May primary election.

If approved, the new rate will become effective July 1, Additional information may be obtained from your local school district business office or www. The deadline for property owners to apply with the County Assessment Office is March 1. There is no application fee for filing. All applicants will be notified by the County Assessment Office regarding the status of their application. An owner aggrieved by the decision of the Chief Assessor may request an appeal to the board for a review of the decision in a manner consistent with the provisions for the appeals under the 4th through 8th class counties assessment law.

In subsequent years every eligible property that has not responded will receive an application at least 60 days prior to the March 1 deadline. The Homeowner Tax Relief Act, Act 72 of , was signed into law by Governor Rendell on July 5, , to allow school districts to reduce property taxes through a homestead exclusion.

Property tax relief will be funded by a combination of state revenue from gaming and dedicated local income taxes. Under a homestead property tax exclusion, the assessed value of each home is reduced by the same amount before the property tax is computed.

In June of Act 72 was amended and changes are now apart of Act 1 of A homestead property is a dwelling primarily used by an owner as his or her permanent home. The owner may be living temporarily 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.