What is a Homestead Exemption in Texas?

Blackwood Real Estate Advisors February 21, 2018

Many of my clients have questions regarding homestead exemptions. If you haven’t already declared a homestead exemption on your primary residence, then you will definitely want to take advantage of your homestead exemption right away.

What is a Residential Homestead Exemption?

  • A homestead exemption removes part of the value of your property from taxation and therefore lowers the amount of your property taxes. Your home qualifies for an exemption if 1) you own it, and 2) it is your principal place of residence in January, when the county assesses annual property taxes. The amount of the exemption depends on state and county laws. What you should know:

Does a Homestead Exemption give me a break on my taxes?

  • Homestead exemptions remove part of your home’s value from taxation, so they lower your taxes.For example, your home is appraised at $100,000, and you qualify for a $25,000 exemption (this is the amount mandated for school districts), you will pay school taxes on the home as if it was worth only $75,000. Taxing units have the option to offer a separate exemption of up to 20 percent of the total value.

Do all homes qualify for a Homestead Exemption?

  • No, only a homeowner’s principal residence qualifies. To qualify, a home must meet the definition of a residence homestead: The home’s owner must be an individual (for example: not a corporation or other business entity) and use the home as his or her principal residence on January 1 of the tax year. If you are age 65 or older, or disabled, the January 1 ownership and residency are not required for the age 65 or disabled homestead exemption.

What is a Homestead?

  • A homestead can be a separate structure, condominium or a manufactured home located on owned or leased land, as long as the individual living in the home owns it. A homestead can include up to 20 acres, if the land is owned by the homeowner and used for a purpose related to the residential use of the homestead.

What types of Exemptions can you receive?

  • School taxes: All residence homestead owners are allowed a $25,000 homestead exemption from their home’s value for school taxes.
  • County taxes: If a county collects a special tax for farm-to-market roads or flood control, a residence homestead is allowed to receive a $3,000 exemption for this tax. If the county grants an optional exemption for homeowners age 65 or older or disabled, the owners will receive only the local-option exemption.
  • Age 65 or older and disabled exemptions: Individuals age 65 or older or disabled residence homestead owners qualify for a $10,000 homestead exemption for school taxes, in addition to the $25,000 exemption for all homeowners. If the owner qualifies for both the $10,000 exemption for age 65 or older homeowners and the $10,000 exemption for disabled homeowners, the owner must choose one or the other for school taxes. The owner cannot receive both exemptions.
  • Optional percentage exemptions: Any taxing unit, including a city, county, school, or special district, may offer an exemption of up to 20 percent of a home’s value. But, no matter what the percentage is, the amount of an optional exemption cannot be less than $5,000. Each taxing unit decides if it will offer the exemption and at what percentage. This percentage exemption is added to any other home exemption for which an owner qualifies. The taxing unit must decide before July 1 of the tax year to offer this exemption.
  • Optional age 65 or older or disabled exemptions: Any taxing unit may offer an additional exemption amount of at least $3,000 for taxpayers age 65 or older and/or disabled.
  • How do I get the $25,000 Homestead Exemption?

    • The application for homestead exemption is one-time only, free and there is no fee to apply. You must file your application for exemption by April 30 for an exemption to apply for that calendar year. You can apply for a retroactive exemption up to one year after the property tax delinquency date (normally February 1st).You should have received a homestead exemption form in the mail from your county, you can get homestead exemption forms online, or you can file online for most counties. Go to your property address on the appraisal district website and look for the file homestead exemption online.

      Collin County Appraisal District: https://www.collincad.org/

      Dallas County Appraisal District: www.dallascad.org

      Denton County Appraisal District: https://www.dentoncad.com/

      Tarrant County Appraisal District: www.tad.org

      General application form for state of Texas: https://www.comptroller.texas.gov/forms/50-114.pdf 

    If I own only 50% of the home that I live in, do I still qualify for the Homestead Exemption?

    • Yes. However, if you qualify for a homestead exemption and are not the sole owner of the property to which the homestead exemption applies, the exemption you receive is based on the interest you own. For example, if you own a 50 percent interest in a homestead, you will receive only one-half, or $12,500, of a $25,000 homestead offered by a school district.

    Will the Homestead Exemption protect me from the increases in property taxes?

    • YES!  And this is one of the most important aspects!  When you have a Homestead Exemption, it puts a 10% cap on how much they can raise the valuation of your home.  For instance, if you have a $100,000 home, and next year, the valuation is $150,000, rather than your taxes going up by 50%, they must cap the valuation at $110,000 for the next year.  Yes, they will continue to raise it 10% each year until the cap value matches the market value, but at least they must do it slowly!

     

    Visit these websites for more information:  https://comptroller.texas.gov/taxes/property-tax/exemptions/#skip-scroll and https://texaslawhelp.org/article/property-taxes

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