What Is A Homestead Exemption?
A homestead exemption lowers the taxable value on your home which reduces your property tax obligation. In other words, a homestead exemption saves you money. For more information on the Over 65 and/or Disabled Person Exemption be sure to check out our page on Other Types of Property Tax Exemptions.
In Texas, the residential homestead exemption entitles the homeowner up to a $25,000 reduction in property tax value for school tax purposes (depending on the county). Counties, cities, and special taxing districts may offer homestead exemptions up to 20% of the total value. Most counties in North Texas do offer this 20% reduction. A county may also offer a $3,000 exemption if it collects for farm-to-market roads or flood control. Don’t worry, there is an example below that will illustrate this as well as links to calculators for estimated savings.
File For A Homestead Exemption
To qualify and file for a homestead exemption you must
- Own and occupy your home as your principal residence by January 1 of the year application is made. To be specific, you need to own and occupy the property by the time the ball drops in New York on December 31st!
- The exemption must be filed before April 30th of that year.
- You will be required to provide your Texas Driver’s License and the address must match the home’s address.
- There is no cost for filing the homestead exemption application, it is FREE and you can do it yourself. Don’t be taken advantage of by companies that offer to do it for you for a fee.
Homestead Tax Cap
An additional benefit of the general homestead exemption, especially in an appreciating housing market, is the homestead cap, or limitation on increases in appraised value. The cap applies to your homestead beginning in the second year you have a homestead exemption (because the taxing authorities will most likely adjust your first year’s tax value to be something comparable to your purchase price).
The cap law provides that the taxable appraised value cannot exceed the lesser of:
- This year’s market value; or
- Last year’s appraised value, plus 10% plus the value added by any new improvements made during the preceding year.
If homes are appreciating at more than 10% per year the cap can provide substantial tax savings.
Frequently Asked Questions
How Much Does A Homestead Exemption Save Me?
A homestead exemption can save hundreds, if not thousands of dollars (depending on the price of the home). For example, a $300,000 home with a $15,000 homestead exemption has a school tax rate of 1.54%, that means the property taxes would be lowered by $231 per year. ($15,000 exemption x .0154 tax rate = $231 savings). If that same home has a 20% value reduction homestead exemption for the county with county tax rate of .25%, that saves the home owner $150 per year. ($300k value x 20% value reduction = $60,000 value reduction x .0025 tax rate = $150 savings).
Do I Have To Apply For A Homestead Exemption Each Year?
No. If you had a homestead exemption on your home in 2015, you won’t need to reapply for 2016 unless your chief appraiser requires it. However, if you haven’t received an exemption on your present home—or if you’ve moved to a new home—you’ll need to file for an exemption for 2016. If you are age 65 this year, you may file for the age 65 or older exemption up to one year after the date you became age 65. And if you became disabled, you may file for the disabled person’s exemption. [/toggle]
If I Own 50% Of The Home I Live In, Do I Qualify For The Residence 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, you own 50% interest in a homestead you will receive one half, or $7,500, of a $15,000 homestead offered by a school district.
What If I Forgot To File Last Year?
Good news, late applications for a residence homestead exemption will be accepted if filed no later than 1 year after the tax delinquency date for the tax year you are claiming the exemption.