The worst type of benefits are the ones you never receive because you don’t know about them. Unfortunately, this is the case for many Texas homeowners and a great reason why it is important to understand the Texas Homestead. This guide will help you understand the essentials of the Texas Homestead and its benefits for you.

The Texas Residential Homestead Exemption

No one likes paying more taxes than you have to. But if you’re not taking advantage of the Texas Homestead Exemption, you may be. Use this guide to understand a great way Texas lets you reduce your overall property taxes.

  1. If you own your home in Texas you can deduct $15,000 from the assessment value when figuring the school property taxes.  For example, if your home is valued at $150,000 and you qualify for the exemption, you will pay taxes on your home as if it was worth $135,000. To qualify, you must own your home and use it as your primary residence as of January 1st. This exemption only applies to your primary residence. If you move from your home, but do not establish another primary residence and intend to return, you still qualify for this exemption. You can even use part of your home for a business or rent out a portion of it and you will still qualify for the exemption for the rest of your house.
  2. Your County may also offer an exemption if it collects taxes for flood control or farm-to-market roads. You may receive an additional $3,000 exemption for this tax.
  3. If you are a homeowner age 65 or older and/or disabled you may qualify for an additional $10,000 homestead exemption for school taxes on top of the 15,000 general exemption. If you are age 65 or older AND disabled, you may apply this exemption once. In other words, the maximum additional exemption is $10,000 whether you are age 65 or older, disabled, or both. For taxpayers 65 and older and/or disabled, other taxing units may also offer an additional exemption of at least $3,000.
  4. Other taxing units may offer optional percentage exemptions of at least $5,000 up to 20% of the home value. Each taxing unit must decide before July 1st of the tax year if it will  offer an exemption and the percentage it will offer. This exemption is added to any other qualified home exemptions.
  5. The application and all required documentation must be completed and filed between January 1st and April 30th the year for which the exemption is requested. While applications will not be accepted early, if you miss the deadline you may still apply up to one year after taxes became 1 year delinquent. If you are age 65 or older and/or disabled, you have 1 year from the date you qualify to apply for the special exemption.
  6. BEWARE OF SCAMS! The application for the Texas Homestead Exemption is absolutely FREE. You may receive letters in the mail or phone solicitations offering to take care of your application fee. They often charge around $50, and can be very confusing for homeowners. Just throw them away! All you need to do is fill out the application and mail it in. It will cost you a stamp, and nothing more.
  7. An additional benefit of the residential homestead exemption is the Homestead Cap. Beginning in the second year of ownership, the Homestead Cap places a limitation on increases in the appraised value used to determine property taxes. It ensures the value used to calculate your taxes will not exceed the lesser of this year’s market value OR last year’s appraised value plus 10% and any value added by improvements made the prior year. This can translate to significant tax savings when homes are appreciating at more than 10% a year.
  8. If you are considering buying a house or selling your house, the taxes will generally be prorated for the year at closing. This is just an estimate and will not affect your tax liability. The tax exemption will normally stay in place for the entire year and your final taxes will reflect it. If you are the new owner of a home that had a tax exemption when you bought it, you will still need to apply for the exemption in your name. Also, at the end of the year, a postcard is mailed out to confirm your primary residence. If this postcard gets returned undeliverable, the homestead exemption will be lifted and you will have to reapply.
  9. During hard economic times the Texas Homestead also has a provision to protect homeowners against creditors during bankruptcy and foreclosure. It prevents a forced sale of a home in order to satisfy a debt to a creditor. As long as the creditor does not fall under one of  nine exemptions, the homeowner is protected.

What You Don’t Know Won’t Benefit You

If you are unaware of the Texas Homestead, it could be costing you needless taxes each year. Use this guide as a start to making the most of the Texas residential homestead exemption. Substantia Realty is your Houston real estate resource. Contact Us to learn more about how to file a residential homestead exemption in Houston.