To some people a homestead exemption sounds like something used for farming, which likely doesn’t apply to you. In Texas, however, a Homestead Exemption means money in your pocket. With the new year finally upon us I want to break down the importance of this property tax exemption to Texas homeowners. And even if you don’t own a home, this might be great info to pass on to your friend, or family member.
What is a Homestead Exemption?
For starters, each state has varying degrees of homestead exemption. If you are located outside of Texas you will need to check with your states’ individual statutes.
In Texas, a homestead exemption protects your property from tax increases (by capping at a 10% increase per year), it protects against creditors (from filing 100% value liens on the property), and it reduces the property tax paid on the property (by reducing the taxable value by 20%).
Who qualifies for a Homestead Exemption?
All Texas homeowners whose primary residence is owned and occupied by the owner for that calendar year. For example, for a 2019 exemption you would need to occupy the home by January 1st, 2019.
In the other instance, if you purchased a home mid year 2018 and the home currently had a homestead exemption then the exemption will carry through the rest of 2018, independent of ownership change. But you will need to apply for a new homestead exemption starting the following year.
How am I saving money?
If you purchased a home for $100,000 and it is appraised at the value you paid, then your homestead exemption would decrease your taxes by the following:
(Appraised value – 20%) x tax rate in county = yearly taxes
20% of $100,000 value = $80,000 (taxable value) x 0.025 (tax rate in Harris county) = $2,000
In this example, the homestead exemption saves the homeowner $500 per year in taxes (taxes without the homestead exemption = $100,000 x 0.025 = $2500/year).
How can I apply?
In most Texas counties, the appraisal district in which the home is in will have a website with a homestead exemption form (usually under popular forms) available. You will need to submit the form along with a valid Driver’s License by April 30th of the tax year. Note, the address on the Driver’s License MUST match the home address.
As a bonus, Harris County Appraisal District in Houston, TX has an app to make the homestead application even easier! Talk with your local real estate professional to see what tools your local appraisal district has available!
And as always, if you have any questions or real estate needs reach out to me via my website or contact info. I am happy to help! Happy New Year!
Harris County Appraisal District Website: www.hcad.org