Property Tax Consulting: Homestead Exemption

In a previous blog, I discussed one of the common ways to reduce the taxable assessment on your real estate, which is to file a protest with the Appraisal Review Board. Every county in Texas will hear hundreds of protests every year and many property owners will walk away with a lower assessment. However, filing an appeal isn’t the only way to lower your property taxes. Another common way to lower your property taxes is through the use of a property tax exemption.

Homestead Exemption Definition

An exemption removes or “exempts” part of the property’s value from taxation and hence lowers your property tax bill. The exemption amount can be a stated amount such as $15,000, or a percent of the total value such as 20%.

Homestead Exemptions img

You can visit your county appraisal district’s website to get an application for these exemptions and to get a more detailed explanation. For the purposes of this blog, I am going to focus on the first four exemptions listed above because they pertain to a property owner’s homestead and are the most common.

Residential Homestead Exemption

The Residential Homestead Exemption reduces the taxable assessment of a property owner’s homestead. For example, if your home is valued at $200,000 and you qualify for a $15,000 exemption, then your taxes will be computed on a value of $185,000. Some jurisdictions offer an additional 20% so if your home is valued at $200,000 you would get 20% or $40,000 in addition to the $15,000 reduced from the assessment resulting in a taxable assessment of $145,000! That is significant and well worth the application process.

To qualify for a residential homestead exemption, you must own and occupy the home as your primary residence on January 1, and you can not claim the exemption on more than one property.

Age 65 or Older Homestead Exemption

As people move into retirement, they tend to operate more on a “fixed” income. It is for this reason that the Age 65 or Older Homestead Exemption was instituted. To qualify you must be 65 or older and meet all the qualifications for a residential homestead exemption. This exemption further reduces the taxable assessment by some stated amount such as $30,000. Continuing with the example above, the new taxable value would be $115,000 on a $200,000 home. However, the reduction in the assessment is only part of the benefit of this exemption. The best benefit is provided by the tax “ceiling” placed on the School portion of the property tax bill. The School tax bill that is generated in the year a property owner qualifies for this exemption will never go above that amount. The value of your home can continue to increase along with the real estate market, but the actual taxes paid to the school district will not. Again, continuing with the example above, if the taxable value of the property is $115,000 and the school tax rate is 1.3% then the school taxes will be $1,495. This amount will also be the “ceiling” for all future years no matter how much the value increases. The County and City may also allow the “ceiling” but it’s typically only on the school portion.

Please visit your county appraisal district’s website to determine how the Age 65 or Older Exemption affects your property.

Disabled Person Homestead Exemption

The Disabled Person Homestead Exemption operates much like the Age 65 or Older Exemption but is not age-dependent. To qualify you must meet the Social Security definition of a disabled person and receive disability benefits under the Federal Old-Age, Survivors and Disability Insurance Program administered by the Social Security Administration.

If you qualify for both the Age 65 and Disabled Person exemptions, you must choose one or the other. You can not have both.

Disabled Veteran Exemption

Under the Disabled Veteran Exemption, all or part of the residence may be exempt from property taxation. If you are a disabled veteran who receives 100% disability compensation due to a service-connected disability and a rating of 100% disabled, then you are entitled to an exemption of the total value of your homestead. In addition, if you are a surviving spouse of a veteran who previously qualified for this exemption, then you are entitled to the same exemption on the same property. If you are a veteran receiving partial disability, you may also qualify for this exemption but the amount of the exemption will depend on the amount of your disability rating.

Again, please visit your county appraisal district’s website for further clarification on this exemption and its qualifications.

Homestead Exemption Application

There are several exemptions available to all types of property. I’ve only discussed some of the more common residential exemptions. Should you have any exemption or property tax questions, please feel free to contact me anytime. At the Hegwood Group, we are well versed in the exemption application process. Contact us today, it’s possible you are missing an exemption on your property that could result in a refund for previous years.