It’s that time of the year again. Tax season may not be your favorite time of the year, but it can actually bring some financially rewarding perks. As a first time homeowner who recently bought a home in Texas, you have the opportunity to submit an application for the Residential Homestead Exemption. Every homeowner, not just first time homeowners, can file for a Homestead Exemption starting January 1st until April 30 of the tax year.
A lot of homeowners, even the experienced ones, can still have difficulty keeping track of everything they need for tax season. On top of that, many homeowners don’t realise that there are ways they can save money on their property taxes.
Texas offers a variety of partial or total exemptions from appraised property values used to determine local property taxes.
- Age 65 or older exemption
- Disability exemption
- Charitable organization or business exemption
- Residential homestead exemption
- Solar and wind-powered energy device exemption
- Veteran’s exemption
Residential Homestead Exemption is one of the six property tax exemption types listed by the Texas State Comptroller to provide some relief from property tax. If you want to know how Homestead Exemption can reduce the amount of your property tax bill then let’s get started.
What is a Homestead Exemption?
A homestead simply means a person’s primary residence. And the term Homestead Exemption is an exemption from property taxes that can be claimed by homeowners on their primary residence. It removes part of the home’s value from taxation, which either lowers your property taxes or removes them altogether.
A Homestead Exemption is a legal mandate in Texas which is also designed to protect the value in a principal dwelling place. So long as you both live in the structure and own it, a homestead exemption can shield a homeowner’s equity. It can also protect a homeowner in distress from the loss of his or her home due to the following reasons:
- age of the homeowner,
- suffering from a disability or debilitating illness,
- personal bankruptcy,
- death of a home-owning spouse, or
- lenders and creditors who might otherwise foreclose on the residential property
By Texas law, Tax Code Section 11.13(b) requires school districts to offer a $25,000 exemption on residence homesteads and Tax Code Section 11.13(n) allows any taxing unit the option to decide locally to offer a separate residence homestead exemption of up to 20 percent of a property’s appraised value. The local option exemption cannot be less than $5,000. Tax Code Section 11.13(a) requires counties that collect farm-to-market or flood control taxes to offer a $3,000 residence homestead exemption.
If your home is assessed at a certain value, the homestead exemption reduces the value by a particular amount. That amount is used as the basis of your property tax payment, which is subtracted from your home’s assessed value and multiplied to your local property tax rate.
For example, if your Houston house is assessed at $250,000, and you receive a $25,000 homestead exemption, you pay taxes on a house assessed at $225,000. If you live in Harris County in a house valued at $225,000 after the homestead, your estimated property taxes are $4,567, based on the average tax rate of 2.030%.
If you live in a house with the same evaluation in Freestone County, you will pay $2,903 in property taxes based on a rate of 1.290%.
What types of homestead exemptions are available?
Texas Comptroller of Public Accounts lists several types of homestead exemptions you may receive in Texas.
- 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 homeowner’s 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.
Who qualifies for the Texas Homestead Exemption?
Texas homestead exemption applies to a homeowner if they meet the following criteria:
- an individual homeowner, not a corporation or business entity;
- owns the property on January 1st of the tax year or prior to taxes being due;
- occupies the property as their primary residence on January 1st;
- has not claimed a residence homestead exemption on any other property;
- a homeowner who is at least 61 years old the year he or she applied for the exemption, or is suffering from a disability, or is a military veteran who was disabled in the course of duty.
If you decide to temporarily move away from your Texas property, you still can qualify for a county appraisal district homestead exemption. You just need to prove that you have no other another principal residence and you intend to return in a period of less than two years.
If you’re not the sole owner of the property, you can still apply for a homestead exemption based on the interest you own. This means that if you qualify and you own 50%, you’ll receive half of the $25,000 homestead offered by a school district, which is $12,500.
How do you apply for a Homestead Exemption in Texas?
A qualified Texas homeowner can file for the homestead exemption by filing out the application specific to their County Appraisal District. They can mail the completed form, along with all the required documents to the Appraisal District for their County.
Required Documents
Aside from your completed Residential Homestead Exemption Application form for your County, you need to ready the following documents. Take note that your Homestead Exemption will be denied unless all of the required documents show the same homestead address.
1) A copy of your valid Texas driver’s license or state-issued identification card; and
2) A copy of your vehicle registration receipt; or
a) if the applicant does not own a vehicle, an affidavit to that effect signed by the applicant; and
b) a copy of a utility bill in the applicant’s name for the property for which exemption is sought.
Include with an application for a request for an AGE 65 OR OLDER OR DISABLED exemption:
For an AGE 65 OR OLDER OR DISABLED exemption whose name isn’t specifically identified on a deed must provide an affidavit or other compelling evidence establishing the applicant’s ownership of an interest in the homestead
Include with an application for a request for a 100% DISABLED VETERANS exemption:
For a 100% DISABLED VETERANS exemption (or the surviving spouse of a disabled veteran who qualified for the 100% disabled veteran’s exemption) must provide documentation from the United States Department of Veterans Affairs or its successor indicating that the veteran received 100% disability compensation due to a service-connected disability and had a rating of 100% disabled or individual unemployability.
Must also Include with applications for MANUFACTURED HOMES:
1. A copy of statement of ownership and location for the manufactured home issued by the Texas Department of Housing and Community Affairs showing that the applicant is the owner of the manufactured home;
2. A copy of the purchase contract or payment receipt showing that the applicant is the purchaser of the manufactured home; or
3. A sworn affidavit by the applicant indicating that:
a) the applicant is the owner of the manufactured home;
b) the seller of the manufactured home did not provide the applicant with a purchase contract; and
c) the applicant could not locate the seller after making a good faith effort.
Depending on the county where you reside, some counties allow you to electronically file your residential homestead exemption. To make sure that you following the correct procedure and providing the correct documents, contact your state’s tax office or secretary of state’s office for specific instructions on how to apply for a homestead exemption.
Application Deadlines
Deadline for filing a county appraisal district homestead exemption application is between January 1 and April 30. A Texas homeowner may file a late county appraisal district homestead exemption application if they file no later than one year after the date taxes become delinquent. The typical delinquency date is February 1st.
Is applying for a homestead exemption worth it?
It can be quite financially advantageous if you can qualify for a homestead exemption. You will pay less annually on your property taxes since this exemption lowers the taxable value of your home.
Homestead exemption provides some relief from property tax as greater exemptions apply for those over age 65 in Texas. Aside from tax savings, a homestead exemption can also protect a primary residence from forced sale or seizure — that is, having to sell the home to pay off creditors.
With some preparation and knowledge, the tax season will no longer be as overwhelming as it was. It may not enjoyable to think about your taxes, but knowing about exemption. So, get your homestead exemption application ready and filed in by April 30 to allow time for your county appraisal district to process it before your yearly tax statement is sent.
As always, if you’re looking to buy or sell your Houston home this year, reach out to the amazing agents of ApexPro.