Property Taxes and Homestead Exemptions

This article, written by the Entrepreneurship and Community Development Clinic (University of Texas School of Law) and Texas RioGrande Legal Aid (Austin office), discusses homestead exemptions. It may help you save property taxes on your home.

What property qualifies as a "homestead?"

A “homestead” is a house or other residential structure that you own, together with up to 20 acres where the structure sits if the land is used for residential purposes. A manufactured home on a rented lot qualifies as long as you own the home. Manufactured homes must meet additional requirements for a "Statement of Ownership and Location," but if you did not receive the paperwork from the prior owner and cannot locate the seller after making a good faith effort, you can submit the affidavit in Form 114-A [1].

Who is eligible for a homestead exemption?

General residence homestead exemption. You are eligible for a homestead exemption if you (1) own your home (partial ownership counts), (2) the home is your principal residence, and (3) you have a Texas driver’s license or Texas-issued personal identification certificate (your I.D. card address must match your principal residence address).

Homeowners who qualify for a general residence homestead exemption are also eligible for the following exemptions if they meet these criteria:

Over 65 exemption: For homeowners 65 and older. If you are over 65 when you die, your surviving spouse 55 or older will get your over-65 exemption.
Disability exemption: For homeowners (not their children) who have a disability that would qualify for Social Security Disability benefits. If you are a senior and have a disability, you can take only one of the exemptions.
Veteran exemption: For veterans who have a disability, their spouses and survivors, and spouses and survivors of military personnel killed on active duty. The amount of the exemption depends on the percentage of service-connected disability. 100% disabled equals 100% exemption.

How much will I save with the homestead exemption?

How much you save with the homestead exemption depends on the exemption amounts and tax levels adopted by your city, county and other local governments. A homestead valued at $200,000 with a 20% exemption ($40,000) means you pay property taxes as if your home were valued at $160,000. Once you obtain an over-65 or disabled exemption, your school taxes are frozen (meaning they do not increase) until your home is no longer your primary residence.

How do I apply for a homestead exemption?

To apply for a homestead exemption, you need to submit an application with your county appraisal district. Filing an application is free and only needs to be filed once. The application can be found on your appraisal district website or using Texas Comptroller Form 50-114 [2]. If you turn 65 or become disabled, you need to submit another application to obtain the extra exemption, using the same Form 50-114. [2]

How do I qualify for a homestead exemption on an inherited home?

If you have inherited your home, you can qualify for 100% of the homestead exemption if the home is your primary residence. If you do not have a deed in your name or other recorded instrument documenting your ownership, you can still qualify for an exemption by completing a simple affidavit in the homestead exemption application form, which is available in Form 50-114-A [1] on the Texas Comptroller’s website. Several other documents are required to be submitted with the application as proof of ownership. See the instructions to Form 50-114 [3] and information about “Heir Property.” Also, see Inherited Homes, Homestead Exemptions, and Property Taxes [4].

When do I apply for a homestead exemption?

You can file the application for a homestead exemption at any time. If your application is postmarked by April 30^th, the exemption can be processed in time for your property tax bill that comes out in the fall. If you file after April 30^th, the exemption will be applied retroactively if you file up to one year after the tax delinquency date (typically February 1^st of the following tax year). You can also apply anytime for the over-65 or disabled person exemption after you qualify for the exemption; the exemption will be applied retroactively if you file within a year of turning 65 or becoming disabled.

What happens if I don't pay my property taxes?

If you do not pay your property taxes, the county can put a lien on your homestead and foreclose on your home unless have qualified for a deferral. After foreclosure, you have two years to buy back your home. Your homestead is not be subject to foreclosure for unpaid property taxes from 20 or more years ago. Homeowners with an over-65, disability, or disabled veterans exemption are eligible for a deferral from property taxes until they die or until the home is no longer their primary residence, at which time all the taxes are due unless the person’s heirs also qualify for a deferral. Interest on the deferred taxes accumulates at an annual rate of eight percent and is due at the same time as the taxes. If you are eligible, you can apply for a deferral from your county appraisal district. You should first check with your mortgage company to ensure your deferral won’t violate your loan terms.

Can I ask for a payment plan to pay my property taxes?

You may be able to ask for a payment plan to pay your property taxes. When a person with a homestead exemption is delinquent in the payment of taxes, the tax collector is required to enter into a repayment installment plan of 12 to 36 months if the homeowner requests a plan, as long as the homeowner has not entered into a plan in the prior 24 months. Interest accrues at 12 percent a year. Persons with an over-65, disability, or disabled veterans exemption can spread out their tax payments over a year in four installments without penalty or interest. To use the installment payment plan option, you must include a notice about this with your first payment. The payments are due before February 1, April 1, June 1, and August 1.

If the owners are married, can they claim two homestead exemptions?

No. A married couple can claim only one homestead.

What happens to the homestead exemption if I move away from the home?

If you move away from the home, the homestead exemption still applies if (1) you do not establish another primary residence; (2) you intend to return and (3) you are away for less than two years unless you are in the military service or live in a nursing home, assisted living or similar facility.

What happens to the homestead exemption if I rent my home?

If you rent part of your home or use part of it for a business, the exemption still applies to the entire home, including the rented portion, as long as the home is still your principal residence (and if you move away, you meet the requirements above).

If my home is damaged or destroyed in a disaster, is my homestead exemption affected?

If your homestead is damaged or destroyed by disaster and you cannot live in it, the homestead exemption will still apply for up to two years from the date the physical preparation for rebuilding begins. You must rebuild on the same property and live there afterward.