What is Homestead Exemption in Texas?

So, you might be looking to buy a home and wondering if there is a property tax exemption for you. Or maybe you have heard of the homestead exemption Texas.

In Texas, a homestead exemption assists in saving you on taxes for your home. A portion of the value from your property is taken off from taxation. It also lowers your taxes for your property.

Texas Residential Homestead Exemption

We will now unravel the details about what is homestead exemption in Texas. There are a few types of exemptions you may qualify for.

School taxes: For those that qualify for the school taxes, you will receive a minimum of $25,000 of homestead exemptions on the overall value of your home when it comes to school district taxes.

County taxes: In Harris County, they offer up to 20% of the homestead exemption to homeowners. Let’s say your home is valued at say $100,000. Then your taxable value will be $80,000.

Optional exemptions: Various taxing units such as the county, special district, city, and school district may provide 20% of your home’s value. But the rule is that the amount cannot be under $5,000 no matter the percentage. That specific organization body will determine the percentage and the type of exemption.

Homestead Exemption in Texas

When Can You File for Homestead Exemption in Texas?

For the regular residential homestead exemption in Texas, you can file your application between the time frame of January 1st to April 30th. Applications earlier than the 1st will not be accepted. But when should you file for homestead exemption? You should file as early as possible. This is because it gives the district enough time to process your application before your tax statements arrive in the fall. They also do not accept late applications.

To apply for a homestead tax exemption in Texas, you need to complete the required Texas homestead exemption forms. Make sure when applying, you carefully read what is homestead exemption Texas, because some benefits and qualifications may change.

Tax Limitation or Exemption Transfer

One of the major advantages to the homestead exemption is the homestead limitation or cap on increases in the appraised value. This tax limitation takes into effect to your homestead starting in the second year that you have a homestead exemption. This cap law states that the value of your taxes cannot exceed the lesser of the following:

  1. Last year’s total appraised value, adding 10% plus value added by new improvements made on your home during the previous year or
  2. Current year’s market value

For homes that are appreciating at a rate of over 10% each year, the cap can offer a large amount of tax savings.

Exemption Transfers:

For those individuals who purchase or sell a home that has an over 65 or disability exemption, some rules differ. This is dependent on whether that person performs an exemption transfer to a different homestead during the current year or not. The exemption transfer indicates that you can transfer a significant or part of your tax benefits from one home in Texas to another in the state of Texas.