How Filing a Homestead Exemption Can Help Homeowners
Are you a recent homeowner? A Homestead Exemption can be an excellent option to reduce your tax burden. Homestead exemptions have the potential to lower your taxes by removing part of your home’s value from taxation. From the Texas Comptroller: “For example, your home is appraised at $100,000, and you qualify for a $25,000 exemption (this is the amount mandated for school districts), you will pay school taxes on the home as if it was worth only $75,000.” While this is a law that exists in most states, property owners might not understand how the exemption works and who can claim it. In this article, we explain what a homestead exemption is, its benefits, who qualifies and how to file
What is a Homestead Exemption and How Does It Work?
With a homestead exemption, homeowners can deduct part of the property value from their taxes, lowering their overall tax bill. Typically, there is a fixed discount, and then the rest of the value is taxed at the normal rate. This favors homes that have a lower value. Exactly how much protection the exemption provides and how it’s applied varies by state. In some locations, the benefit is automatic. In others, including Texas, a homeowner must first file a claim with their state to be able to receive it.
This means that if you’re eligible for a homestead exemption in Texas, you can potentially reduce your tax burden just by filing a claim.
Other homestead exemption benefits include protection of a homeowner’s primary residence from creditors in the event of bankruptcy or a deceased spouse. It also helps the surviving spouse with continual tax relief. In addition to financial protection, this exemption offers physical shelter, in that it prevents the forced sale of the property.
Benefits of Filing for a Homestead Exemption
The benefits of filing for a homestead exemption include:
- Relief from property taxes – Since property taxes are based on the property’s assessed value, being able to reduce the home’s value on your tax statement makes the property tax significantly lower.
- Protection from a forced sale – Having a homestead exemption shields the property from a forced sale to pay off creditors. For example, if you had trouble paying bills, without the homestead exemption, creditors could try to seize your property to satisfy your debts. Exceptions are mortgage foreclosures and failing to pay property taxes.
- Advantages for a surviving spouse – Though state laws vary, in most cases, if the homeowner dies, their surviving spouse is guaranteed the right to stay in the home for their lifetime. They must, of course, continue to make mortgage and other payments in a timely manner. In Texas….
An Important Note: The homestead exemption protection from creditors will not prevent a bank from foreclosing on the home and taking possession of the property if the homeowner defaults on their mortgage payments.
Who Qualifies for a Homestead Exemption?
To qualify for a homestead exemption, you must:
- Have owned and lived in the property as of January 1st of the current tax year
- Occupied the property as your principal residence
- Not claim any other homestead on a different piece of property
- Have a state issued driver’s license or identification card that shows your current physical address
- File an Application for Residential Homestead Exemption with your county appraisal district between January 1 and April 30 for the current tax year
- Apply for the 65 or older or disabled exemption if you turn 65 or become disabled during the year the tax year
- Re-file for the exemption if you are a surviving spouse and you change your primary residence
Types of Homestead Exemptions for Texas Homeowners
For Texas residents who own their own homes, there are different types of homestead exemptions that they may qualify for.
- County Taxes – These are taxes collected by the county for flood control or farm-to-market roads. If the homeowner is granted an optional exemption because they are disabled or age 65 or older, they will only receive the local-option exemption.
- School Taxes – All homestead property owners may exempt $25,000 from their home’s value that goes towards school taxes.
- Age 65 or Older or Disabled – Those homestead owners who are disabled and/or are 65 or older are entitled to a $10,000 exemption in addition to the general exemption of $25,000 for school taxes.
- Optional Percentage – Any taxing entity, such as a school, city, county or special district, may offer the homeowner an exemption of up to 20% of the home’s value. Regardless of the percentage, the total exemption amount must be at least $5,000. Each entity decides, by July 1 of the tax year, if the exemption will be offered and at what percentage. This amount is added to any other exemption that the owner qualifies for.
- Optional 65 or Older or Disabled – A taxing entity may offer an additional homestead exemption to taxpayers who are 65 or over and/or disabled, of at least $3,000.
- Disabled Veteran Homeowners – Texas residents who became disabled while serving in the military and surviving spouses are eligible for residence homestead exemptions. For more information, see Disabled Veterans and Surviving Spouses Exemptions Frequently Asked Questions on the Texas.gov website.
General Texas-specific information about the residence homestead exemption is also available from the State of Texas Comptroller.
How to File for a Homestead Exemption
Know Your County
To file for a homestead exemption, you must first know what county you reside in. To find your county, you can search with your full address on the Texas HomeTownLocator website.
Obtain the Correct Form
Download the form for your county. Homestead exemption forms are found on county appraisal district websites. These include:
The Texas.gov website provides a complete list of Texas counties, with links to their information and websites.
File on Time
You can file an Application for Residential Homestead Exemption with your county’s appraisal district between January 1 and April 30. You can complete the form and send it by mail to your county’s appraisal district, and in some cases, you can apply online. Once you have received the homestead exemption, you do not have to reapply unless notified by the chief appraiser. If you do receive a new application, you must file it as before.
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