Carlos recently purchased a home in Huntsville for $250,000 and immediately applied for the Alabama homestead exemption. His neighbor tells him that the homestead exemption will reduce his assessed value to zero because the exemption is larger than the assessed value of his home. Assuming Carlos is an individual homeowner and the property is assessed under the Class IV ratio, which of the following best explains why the neighbor's statement is incorrect?

Correct Answer

B) The assessed value of the home is $25,000, which exceeds the $15,000 individual exemption, so Carlos will still owe tax on the remaining $10,000 of assessed value.

Under Alabama's classified property tax system, Carlos's home (Class IV residential) is assessed at 10% of fair market value: $250,000 × 10% = $25,000 assessed value. The individual homestead exemption under Code of Alabama §6-10-2 is $15,000, which is subtracted from the assessed value for purposes of creditor protection — and similarly reduces the taxable assessed value. $25,000 assessed value − $15,000 exemption = $10,000 remaining taxable assessed value. The neighbor is wrong because the $15,000 exemption does not exceed the $25,000 assessed value, so Carlos still owes tax on the $10,000 difference.