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California’s Homestead Exemption is Increasing. What Does This Mean?

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Currently, Californians are able to protect their home equity in an amount up to $75,000 for some homeowners, and up to $175,000 for others. On January 1, 2021, due to the passing of AB 1885, that amount is significantly increasing. Soon, homeowners will be able to claim a homestead exemption that ranges from $300,000 to $600,000. 

Q: How does this impact homeowners?
A: There are a few circumstances when a homeowner will utilize a homestead exemption. One circumstance is if a certain creditor has a court-issued judgment against the homeowner. The homestead exemption is designed to protect the homeowner from that particular creditor foreclosing on the home if the home equity is fully protected by the homestead exemption.

Another circumstance in which the homestead exemption is used is if the homeowner files for bankruptcy. The home equity will be protected from most creditors in a bankruptcy case, up to the amount of the exemption that the homeowner is entitled to. This homestead exemption increase will make it more likely for homeowners who are struggling financially to keep their homes and obtain financial relief.

Q: $300,000 to $600,000 is a wide range. What exemption amount is a homeowner entitled to in 2021?
A: The minimum homestead exemption will be $300,000. Almost every homeowner in California who lives in their home will qualify for the $300,000 minimum exemption. The exemption available to a homeowner may be higher than $300,000 if the median sale price for single-family homes sold in their county was higher than $300,000 during the last calendar year. For example, let’s say that the median home sale price for San Joaquin County in 2020 is $410,000. Please note that this number is an estimate. This would mean that if the homeowner lives in San Joaquin County, they would be entitled to a $410,000 exemption if they claimed the exemption in the year 2021. 

If San Francisco County’s median single-family home sale price for 2020 is $1,600,000, a homeowner living in San Francisco County would have a $600,000 exemption if claimed in the year 2021. This is because the maximum exemption amount is $600,000.

If Kern County’s median single-family home sale price for 2020 is $280,000, a homeowner living in Kern County would have a $300,000 exemption if claimed in the year 2021. This is because the minimum exemption amount is $300,000.

Q: How is equity in a home calculated?
A: You can find out how much home equity you have by estimating the value of your home, then subtracting any liens/mortgages from that amount. For example, Sally’s home is worth $500,000. Sally still owes $260,000 on her mortgage that she used to purchase her home. The home value of $500,000, minus the mortgage amount of $260,000, is $240,000. Sally has $240,000 of equity in her home.

Written by: Grace Johnson 

Grace Johnson, Smith & Johnson Law, A Professional Corporation, is a California attorney who focuses in the areas of probate, bankruptcy, estate planning, real estate, business formation and guardianships. Grace is admitted to practice in the Superior Court of California, and the Eastern, Northern, and Central Districts of California. If you have questions about how this new law will apply to you, or if you are considering bankruptcy, please contact her for a free 20-minute phone consultation; 209-333-9292, 115 W. Walnut Street, Suite 3, Lodi, California, or 

This information is provided for informational purposes only and does not constitute legal advice. You should not act or rely upon the information in this article without seeking the advice of an attorney licensed to practice in your jurisdiction. Smith & Johnson Law, APC is a debt relief agency.