Homestead Exemption Bill Passed by New Mexico Legislature in 2023
On March 16, 2023, the New Mexico Legislature passed sweeping legislation which significantly increased the homestead exemption for New Mexicans from $60,000.00 per person up to $150,000.00 per person.
This increase is part of a $1.1 billion tax relief plan aimed at providing assistance to businesses and individuals that were affected by the Covid-19 pandemic. The bill also increased other exemptions, providing New Mexico families with much-needed relief from the crushing burden of their debt, such as a $500 individual tax rebate, a $600 child tax credit, and a gradual reduction in sales tax. The plan also provides tax incentives for the film industry and a new tax credit for small businesses. Supporters argue that this plan will stimulate economic growth and benefit New Mexico residents in the long run, specifically low-income families with children. However, some lawmakers expressed concern with the scale of the tax cuts and the included tax incentives, which were primarily funded by surplus dollars generated by the oil and natural gas industry in the state. These lawmakers fear that these revenues cannot be counted upon year after year.
The change to the homestead exemption law ensures that thousands of New Mexico families are better able to protect their homes if they are sued by creditors. According to Dennis Banning of New Mexico Financial and Family Law, the major exemptions which were increased by the bill include:
- The homestead exemption increasing from $60,000.00 per person ($120,000.00 per married couple) up to $150,000.00 per person ($300,000.00 for a married couple). This change allows a larger portion of a homeowner’s property to be protected from creditors in the event of bankruptcy.
- Household goods and furnishings exempt up to $75,000.00 per person to ensure that families can retain essential household items.
- Motor vehicle exemptions increased from $4,000.00 per person per vehicle to $10,000.00 per person per vehicle, enabling New Mexicans to keep their means of transportation and mobility during challenging financial times.
- Jewelry exemption increased to $5,000.00 per person to protect personal items with sentimental or monetary value.
- Tools of the trade increased to $15,000.00 per person
- A wildcard exemption increased from $500 to $15,000.00 per person
- An exemption in lieu of a homestead increased from $5,000.00 per person up to $15,000.00 per person
These exemptions are long overdue and will enable to allow New Mexicans to protect their homes, their vehicles, and their belongings from attachment by creditors to a much greater degree than they could before. The bill, which is expected to be signed by Governor Michelle Lujan Grisham next week, would take effect on July 1, 2023.
What is Homestead Exemption?
Homestead exemption is a legal rule that helps to minimize property tax, protect a home during bankruptcy proceedings, or provides certain rights to surviving spouses and/or children. The “homestead” refers to a person’s primary residence, and a “homestead exemption” is the exemption a homeowner claims to lower their property taxes by lowering the taxable value of their home.
Homestead exemptions can also protect you from having to sell your home if you declare bankruptcy. The homestead exemption protects the equity you have built in your home up to a certain dollar amount. Essentially, it allows the property owner to set aside a portion of their property, their “homestead,” as off-limits to creditors.
New Mexico Financial & Family Law Delivers Peace of Mind
Homestead exemption laws can vary from state to state, and the requirements for eligibility can also vary. It is also important to note that homestead exemption laws may not protect you against certain types of debts, such as tax liens. But, if you are filing for bankruptcy or are facing higher bills after the death of a spouse, homestead exemption may be an option.
It can be hard to keep track of changes to homestead exemption laws and the exceptions to them. To learn more about how homestead exemption may affect your financial situation, it is crucial to seek professional advice and stay informed about updates related to these new provisions. The experienced bankruptcy attorneys at New Mexico Financial & Family Law are here to answer all of your questions and help you protect your assets.
Call us today to schedule a free consultation at 505-886-9606.