Everything You Need To Know About Homestead Exemptions

Melissa Hill

01/10/21

FAQ: Everything You Need To Know About Homestead Exemptions

What do property taxes look like in Houston (Harris County, Texas)?

Texas has no state income tax. The primary way that the state generates revenue is through sales tax and property tax. On average, residential property taxes in Houston (Harris County) run a little over 2.5% per year.

What is a homestead exemption?

A homestead exemption lowers the property taxes on a home by lowering its taxable value.

Why do I want a homestead exemption?

This helps homeowners save money from lowered tax rates. Example: If your home is valued at $100,000 and you receive a $20,000 homestead exemption, you will only be taxed based on $80,000.

Who is eligible for a homestead exemption?

Anyone who owns a home on January 1 and uses it as a primary residence as of that date.

Does it matter what type of home I own?

No. Anyone who owns a home: single family home, townhome, condominium or mobile home within Texas is eligible.

If I own a second home, can I apply for exemptions for it too?

No, you can only apply exemptions for your principal residence.

To qualify, a home must meet the definition of a residence homestead: The homeowner must be an individual and use the home as his or her principal residence on January 1 of the tax year. If you are age 65 or older, the January 1 ownership and residency are not required for the age 65 homestead exemption.

What types of homestead exemptions are available?

  • School taxes: If you qualify for the homestead exemption, you will receive at least a $25,000 homestead exemption on the value of your home for school district taxes.
  • County taxes: Harris County provides a 20% optional homestead exemption to homeowners within the area. If your home is valued at $200,000, the exemption will reduce its taxable value by $40,000 bringing it down to $160,000.
  • Optional taxes: Any taxing unit (school district, city, county or special district) can offer an exemption for as much as 20% of your home’s value. The minimum amount of an optional exemption can’t go below $5,000. For example, if your home is valued at $20,000 and your city offers a 20% optional exemption, your exemption is $5,000, even though 20% of $20,000 is just $4,000.

Are there any other exemptions available?

  • If you’re disabled or 65 years old or older, you may be entitled to an additional $10,000 school tax exemption on your home.
    • In addition, if you qualify for the over-65 or disabled exemption, you may be entitled to a permanent, locked-in “ceiling” on the school property taxes on your home. (The county, city or junior college may adopt a tax ceiling to lock in 2007 taxes as the highest amount for 65 and older or disabled homeowners.)
  • The over-65 homeowner’s school tax ceiling transfers to the surviving spouse, if the spouse is 55 years of age or older at the time of death and lives in and owns the home. The age 65 or older home-owners (or their surviving spouses 55 years of age or older) also may transfer the percentage of school tax paid, based on their former home’s school tax ceiling, to a new home.
  • Veterans can also apply for the 100% Disabled Veterans’ Homestead exemption. Homeowners with a disability rating of 100% or individual unemployability from the Veterans’ Administration and receive 100% disability payments from the VA can qualify for this exemption. The disability must be service connected. If you qualify, 100% of the value of your residence homestead will be exempted.

Who can apply for a disabled person’s exemption?

To qualify for the disabled person’s exemption, the applicant must be determined as unable to engage in gainful work because of a physical or mental disability; or is 55 years old and blind and can’t engage in your previous work because of the blindness.

Applicant must meet the Social Security definition for disabled. He/she will qualify if he/she is a recipient of disability benefits under the federal Old Age, Survivors and Disability Insurance Program administered by the Social Security Administration. To prove eligibility, the applicant needs to provide the appraisal district with information on disability ratings from the civil service, retirement programs, or from insurance documents, military records, or a doctor’s statement.

Do I still qualify for a homestead exemption if I temporarily move away?

Yes, as long as you do not establish a principal residence elsewhere and you are away less than two years.

You may continue to receive the exemption if you do not occupy the residence for more than two years only if you are in military service or live in a facility providing services related to health, infirmity or aging from the two-year period.

What is a homestead tax ceiling?

Homestead tax ceiling refers to the limit on the amount of taxes you must pay on your residence.

If you qualify your home for a 65 and older or disabled person homestead exemption for school taxes, the school taxes on that home can’t increase as long as you own and live in that home. The tax ceiling is the amount you pay in the year that you qualified for the 65 – and – older or disabled person exemption.

The school taxes on your home may go below the ceiling but not above the amount of the ceiling. If you improve the home (other than normal repairs or maintenance), the tax ceiling may go higher for the new additions. For example, if you add another room to the house, the tax ceiling will be adjusted to a higher level for the addition.

What do I need to apply?

  • Complete the Harris County Application for homestead exemption.
  • A copy of your driver’s license or state-issued personal identification certificate.
    • The address listed on your driver’s license or state-issued personal identification certificate must correspond to the address of the property for which an exemption is claimed in this application.

When is the application period and deadline?

January 1st–April 30th. The last day to apply for a homestead exemption for the year is April 30. Mailed applications must be postmarked by that date. Missing the deadline means not being able to file for exemptions until next year.

What happens if I miss the deadline for filing a homestead exemption?

You may file for a homestead exemption up to one year after the delinquency date—usually February 1.

If you are 65 or older or disabled, you must apply for the exemption no later than one year from your 65th birthday or one year after the delinquency date, whichever is later.

Do I have to apply each year?

No. If you had a homestead exemption on your home last year, you won’t need to reapply this year unless your chief appraiser requires it.

If you are 65 this year, you may file for the age 65 or older exemption up to one year after the date you turned 65. And if you became disabled, you need to file for the disabled person’s exemption.

What is the appraisal process?

An appraisal district in each county determines the January 1 market value of all taxable property, and the property is appraised at that value unless it is a residence homestead subject to a cap.

Capped homesteads are limited to increases in appraised value of 10% each year. Once a property’s appraised and market values are equal, further increases (or decreases) in value will depend on the market in that neighborhood. The appraisal process allocates the tax burden to ensure that no one property pays more or less than its fair share.

What happens if I buy or sell a home with an existing homestead exemption?

When you sell or buy a home, the taxes for the year will generally be prorated at the closing. This doesn’t actually change your tax liability; the tax assessor will calculate that later in the year. The proration at closing will be based on estimated taxes due. You should be aware of the rules regarding homestead exemptions so that you are prepared if your actual tax liability turns out to be different.

If you buy or sell a home that has only a general homestead exemption on it, the exemption normally stays in place for that entire tax year. The final taxes for the year will reflect the exemption. However, the new owner will have to qualify for the exemption by filing an application in his or her own name for the following year.

If you buy or sell a home that has an existing over-65 or disability exemption, the rules are different. Whether the over-65 or disability exemption stays in place depends on whether the person who qualified for that exemption transfers it to a different homestead during the same year.

Links to county applications for Homestead Exemptions:

Harris County Appraisal District

Fort Bend County Appraisal District

Montgomery County Appraisal District

Brazoria County Appraisal District

McLennan County Appraisal District

If you have any other questions or would like a one on one zoom call for assistance on filing your homestead, I am here to help. Give me a call today at 281-450-3623 or email me at melissa@blantondavy.com

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