Homestead Exemption in Providence RI – How it works

We get so many questions about how the Homestead Exemption works in Providence RI, that I thought it would be helpful to explain it in a post.

The tax rate in Providence for someone that does not live in a home as a “primary residence” is $30.38 per thousand of assessed value.

If by, December 31, you are living in the house AND SUBMIT AND APPLICATION TO THE CITY, then the rate is cut in half to 15.19 per thousand of assessed value. This is called the HOMESTEAD EXEMPTION in Providence RI.

So, for example, let’s say a property is assessed at 400,0000 by the city of Providence.

If it is owner occupied, there is a homestead exemption, so the tax is calculated at (400,000 /1000 =400) X 15.19 or $6076 per year in tax.

If it is NON-owner occupied, the is NO homestead tax exemption, so the tax is calculated at (400,000/1000 =400) X 30.38 for a whopping $12,152 per year in property tax.

 The city says that the owner occupant must own the property by Dec 31 of the PRIOR tax year to qualify for a homestead exemption for the next year 2011.  Then the homestead exemption is in effect for the full tax year 2011.

Here is where is is a bit confusing:

1. The Homestead exemption runs with the property, not the owner. So for example, let’s say you purchased a property in February from an owner that is occupying the property, and has the homestead exemption.  But in this case, instead of living there, you intend to rent the property out to a tenant.  The tax for 2011 would be billed at the owner-occupied rate (because the person you bought it from had the homestead exemption in place, so as an INVESTOR/NON-OWNER OCCUPANT you would reap the benefit of lower tax for the calendar year 2011.  Your bill would rise to the higher level in 2012 however.

2. Conversely, let’s say you purchase the a property which is vacant (non-owner occupied or no exemption) in February 2011.  Then you will be penalized by the fact that there was no owner occupant in place as of Dec 31, 2010.  You will pay the high taxes (same as an investor/non-owner occupant) until you apply for the homestead exemption and the property qualifies in 2012.

3. If you are living in and own such a property for example, as of December 31, 2010, then for 2011, you will get the lower rate, starting in 2011.

4. If you purchase a property from an owner occupant in February, and you live in the property as an owner occupant, than you will have the lower taxes automatically. BUT YOU MUST APPLY yourself for the homestead exemption at a pre-determined time by the city (usually March 15th).  To use an example, if a condo is owner-occupied right now, the taxes would continue to be lower in 2011 no matter when in 2011 you purchase.

As an important note, if you are using and to search, the taxes NEVER reflect the homestead exemption.  Those sites calculate the tax only as a NON-OWNER OCCUPANT, so keep that in mind when figuring out what your actual taxes will be.