Understanding Texas Homestead Exemption Rules

Texas Homestead Exemptions

Property taxes are an undeniable reality for homeowners, but did you know that in Texas, there are ways to reduce this financial burden? This comes in the form of homestead exemptions, a legal provision that can lower your property taxes by excluding a portion of your home’s value from taxation. Understanding the Texas homestead exemption rules and regulations surrounding these exemptions can be a game changer, potentially saving you thousands of dollars each year! Let’s delve into the finer details and unpack what this could mean for you and your financial future.

Short Summary

  • Homestead exemptions in Texas reduce the taxable value of a property, effectively lowering property tax bills
  • The primary eligibility criterion for a Texas homestead exemption is that the property must be the owner's primary residence as of January 1st of the tax year.
  • Texas residents are eligible for a standard $100,000 homestead exemption from public school districts as of November 2023, which can be applied for via an Application for Residential Homestead Exemption and, once granted, remains in place without needing annual renewal.
  • Additional exemptions are available for disabled veterans, individuals aged 65 or older, or those with disabilities.

Eligibility Criteria for Homestead Exemptions in Texas

The crux of eligibility for homestead exemptions in Texas is that the property in question must be your principal residence. But what does this mean in practical terms?

Principal Residence Requirement

Within the realm of homestead exemptions, "primary residence" carries a specific definition. It's the home where you spend most of the year, and the address listed on legal documents like your driver's license and tax returns.

A primary residence homestead isn't synonymous with a single-family home, however. Your "homestead" can be any residence considered your permanent address, including attached units like condos. A mobile home you own placed on land you rent can also qualify with some extra paperwork. As much as 20 acres of land may also qualify for residential homestead exemption, assuming the resident owns the land and it continues to be used only for residential activity.

You can only have one primary residence at a time and, therefore, only one homestead exemption. You can't get a residence homestead exemption on a second home or vacation home.

Ownership Requirement

Essentially, you must both own and reside in the property as your principal residence as of January 1st of the tax year. This key date is a fixture in the property tax world, setting the stage for tax obligations for the year ahead.

Bear in mind that homestead exemptions, including the general residential homestead exemption, aren’t accessible to every type of property owner. They are only applicable to properties owned by individuals, not corporations, partnerships, or LLCs. The owner must be an individual and use the home as their principal residence. Even a trust-owned property must meet specific criteria to be eligible for the exemption.

The Standard $100,000 School District Homestead Exemption

How Much is a Texas Homestead Exemption?

In Texas, there is a standard homestead exemption that is offered by public school districts for primary residences. Before November 2023, this amount was $40,000; however, a constitutional amendment has more than doubled the amount to a generous $100,000.

This exemption reduces the taxable value of your property. This means that if your home is assessed at $500,000 but your property qualifies for the $100,000 homestead exemption, you will pay school district property taxes as if your home was worth only $400,000.

This significantly reduces your property tax obligation and can result in substantial savings. For example, Austin's property tax rate in Travis County includes 0.9966% toward school taxes. For a $500,000 home, that tax would come out to $4,983. For a $400,000 home, that tax would only be $3,986.40, a savings of $996.60 per year.

This exemption doesn’t automatically apply. Homeowners are required to submit an application for it. Let’s explore how to do it and how to maintain eligibility.

Applying for the General Exemption

Assuming the property owner is eligible, applying for a homestead exemption in Texas isn't complicated. While the process may vary slightly from one county to the next, it's a fairly basic procedure.

First, you should check for specific instructions on your local county's tax appraisal district website. Then, download the Texas Residence Homestead Exemption Application and complete the form according to its instructions. Once completed, the application and required documents must be submitted to the appraisal district for the county where the property is located.

Required documentation includes the property owner's driver's license or state-issued identification card. The address listed on the owner's identification must match the property address for which the homestead exemption is being applied.

In cases of inherited property, an heir property owner may be required to provide additional documentation, including the prior owner's death certificate, recent utility bills, and any other requested records. Owners of manufactured homes may also be required to submit additional information to confirm ownership.

Typically, the filing deadline is April 30th. However, Texas property owners may be able to submit a late application with their county appraisal district if they do so no later than a year after the taxes become delinquent.

Late applications may also be accepted for up to two years after the deadline for disabled persons or those over 65. Late applications for disabled veterans may be accepted as late as five years past the delinquency date, and surviving spouses may file up to two years late.

Remember, you don’t need to reapply every year. Once your application is accepted, the exemption usually remains in place as long as you own the property.

Maintaining Eligibility

Keeping your eligibility for the standard homestead exemption is quite simple. You simply need to continue owning and residing in the property as your primary residence. However, there are circumstances where you might lose your exemption, such as if you abandon the property, transfer ownership, or upon the death of the owner, in which case the surviving spouse’s residence homestead may be affected.

It’s also worth noting that eligibility checks are done at least once every five years, so you may occasionally be asked to provide updated information to confirm your ongoing eligibility.

Additional Texas Homestead Exemptions

Additional Homestead Exemptions in Texas

The standard homestead exemption is merely the starting point. Texas also provides a range of specific exemptions that go above and beyond the standard offering. For example, if you’re aged 65 or older, or if you have a qualifying disability, you may be eligible for additional exemptions. These exemptions can result in significant property tax savings and help to make homeownership more affordable for those who qualify.

Keep in mind that these exemptions don’t apply automatically. You must submit an application for them, similar to the standard exemption. The good news is that you can apply for the over-65 or disabled person exemption at any time after meeting the qualifications; if you apply within a year of turning 65 or becoming disabled, the exemption will be retroactively applied.

Age-Based Exemptions

In the context of homestead exemptions in Texas, age holds more significance than being just a number. If you’re 65 years of age or older, you can qualify for additional exemptions. Specifically, there’s an extra $10,000 residence homestead exemption offered by Texas school districts. Other taxing units may also offer additional amounts of $3,000 or more, meaning the savings can really add up.

Any senior homestead exemptions carry over to a surviving spouse, assuming they are age 55 or older, own and live on the property, and apply for the exemption.

There’s also a tax ceiling that sets a limit on the amount of school taxes you’ll pay annually, which provides a level of predictability and stability for your budget. As long as you maintain ownership and residence in your unimproved property, the taxes levied by the school district cannot increase. Any improvements to the residence homestead will result in the tax ceiling being adjusted accordingly.

Note that a percentage of this residence homestead ceiling may be transferable to a new residence. Homeowners must coordinate the transfer between the original appraisal district granting the tax ceiling and the new homestead's appraisal district.

Disability Exemptions

Specific exemptions are available for disabled homeowners, significantly easing their property tax obligations. To qualify for disability exemptions, a person must meet the definition of "disabled" outlined in the Federal Old Age, Survivors, and Disability Insurance Act (OASDI). Although that person may qualify as disabled later in the tax year, the exemption will retroactively apply to the entire year, dating from January 1st.

For example, disabled homeowners may qualify for an additional exemption of at least $3,000 from property taxation, which can be considered as a form of disability benefits. It’s important to note that proof of disability is required to qualify for these exemptions, so be prepared to provide documentation to support your application.

Qualifying disabled persons age 65 or older may receive both the 65+ and disability exemptions, though not from the same taxing units. Disabled persons may also benefit from the residence homestead tax ceiling.

Military Exemptions

In Texas, partial or total exemptions are provided for homesteads of disabled veterans and the surviving spouses of deceased vets.

A disabled veteran's exemption amount is based on the disability rating assigned to them by the U.S. Veterans' Administration or the branch of the armed forces in which they served. Service-connected disability ratings less than 30 percent can qualify for partial exemptions up to $5,000 off the property's value, while ratings of 70 percent or higher may receive an exemption as high as $12,000. A 100% disability rating allows veterans to claim a total property tax exemption, not having to pay property taxes at all on their residence homestead.

Surviving spouses of military members or first responders killed in the line of duty are also allowed a 100% property tax exemption on their primary residence, assuming they've not remarried. In the event of a disabled veteran's death, any existing property tax exemptions pass on to the surviving spouse if they've not remarried.

Optional Exemptions from Other Taxing Units

Beyond the standard and additional exemptions already discussed, there might also be optional exemptions up for grabs. These are offered by other taxing units, such as counties and cities, and can provide further reductions in property taxes. The exact nature and value of these exemptions can vary, so it’s a good idea to check with your local taxing unit to see what you might be eligible for. Becacuse property taxes are levied locally instead of as a state property tax, homestead exemptions in Houston can work differently than in Dallas, for example.

For example, some counties in Texas may offer a Farm-to-Market Roads or Flood Control County exemption of $3,000. Cities, counties, school districts, and special districts can choose to offer a "local option" exemption of up to 20% of a property's value, but not less than $5,000. The 65+ school tax exemption may be $13,000 in some areas (the standard $10,000 plus a local option exemption not less than $3,000). Checking your specific district's tax exemptions could save you hundreds of dollars a year.

Special Situations and Homestead Exemptions

Can I Still Qualify for a Homestead Exemption If...?

Some unique situations could potentially influence your eligibility for homestead exemptions. For example, what if you need to move away from your home temporarily? Or what if the property has multiple owners? The good news is that the rules account for these situations, but it’s important to understand the specifics so you can ensure you’re meeting all the requirements.

Temporary Absence from Homestead

If you need to temporarily move away from your home, you can continue to receive your homestead exemption as long as you don’t establish a primary residence elsewhere, you intend to return to the home, and you’re away for no more than two years. This can be particularly beneficial for individuals who need to temporarily relocate for work or health reasons, but intend to return to their homestead in the future.

There are exceptions to this rule for military service or if you’re living in a health care or aging facility. Homeowners serving in the military may continue to receive the homestead exemption for the duration of their service. Similarly, anyone residing in a health care or aging facility may continue their exemption beyond two years.

Multi-Owner Property Exemption Amounts

Properties with multiple owners may be eligible for homestead exemption under specific circumstances. Married couples, for example, are considered community property owners, with each spouse having 100 percent ownership. Heir property owners may also be eligible for homestead exemption.

In the case of partial ownership of uninherited property between non-married individuals, the amount of exemption is based on the percentage of ownership. For instance, if you own half of a homesteaded residence, you only qualify for 50 percent of the $100,000 school district exemption, or $50,000 total.

Inherited Property Exemptions

In the event of inherited property with one or more owners claiming a residence homestead exemption, heirs may be required to provide the appraisal district with additional documentation, including:

  • a copy of the previous owner's death certificate;
  • a copy of the most recent utility bill for the property;
  • an affidavit showing ownership in the inherited property;
  • and copies of any related court records.

Any other heirs occupying the inherited property as a principal residence must authorize the application for homestead exemption.

Buying a Property With a Homestead Exemption

When you buy a property with an existing general residence homestead exemption, that exemption typically remains for the rest of that tax year. This is because the property tax exemption reflects the owner as of January 1st. To maintain the homestead exemption, you'll need to qualify by filing a new application the following year.

Buying a home with an existing over-65 or disability exemption will meet different rules, depending on whether or not the original owner successfully transferred the exemption to another homestead. If they did qualify elsewhere, property taxes would be prorated to reflect the expiration of that exemption. Otherwise, the exemption stays for the remainder of the year. The buyer can apply in their name if both parties meet the over-65 or disability qualifications.

Lower Your Texas Property Taxes with a Homestead Exemption

Understanding the rules and regulations surrounding homestead exemptions in Texas can potentially save you thousands of dollars each year. From the basic eligibility criteria to the various additional and optional exemptions available, there are many opportunities to reduce your property tax burden. However, it’s also important to understand the filing procedures and deadlines, as well as what to do in non-standard situations. By staying informed and proactive, you can make the most of these valuable tax savings opportunities.

Frequently Asked Questions About Homestead Exemptions

How much does a homestead exemption save you on taxes in Texas?

A general homestead exemption in Texas can save you money on property taxes by lowering the taxable value of your home by up to $100,000 for school taxes. Senior homeowners, disabled homeowners, disabled veterans, and military or first responder spouses can claim additional exemptions. Some taxing districts also offer additional ways to save on your property tax bill.

What is the new homestead rule in Texas?

The new homestead rule in Texas is a $100,000 school tax exemption for general residence homesteads. This means school taxes are calculated based on the home's appraised value minus $100,000. Previously, the school tax exemption was $40,000.

Do seniors over 65 pay property taxes in Texas?

Yes, seniors over 65 must pay property taxes in Texas. However, seniors over 65 can apply for an additional exemption from property taxes, and they receive additional benefits. The property tax rate is capped for senior and/or disabled homeowners, and they can apply to defer their property taxes, eliminating the burden of annual payments. The taxes will still be paid, but only after the owner passes away or the property is sold.

How late can you file homestead exemption in Texas?

In Texas, the filing deadline is April 30th. However, you can file for homestead exemption as late as a year after the taxes become delinquent, or even later if you meet one of the following criteria:

  • Disabled or 65+ years old: 2 years late
  • Surviving spouse: 2 years late
  • Disabled veteran: 5 years late

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