Texas homestead exemptions give homeowners partial property tax reductions. Suppose you primarily reside in a Texas home that you own. In that case, you can file for a general resident homestead exemption that can reduce the taxable value of your property, keep rapidly escalating taxes under control, and provide tax relief year after year. These are the key benefits of a homestead exemption in Texas, and they can be easy to access.
For many homeowners across the state, paying property taxes is becoming unbearable. It’s not just the high tax bills, after all; it’s the shockingly sudden increase in what you’re expected to pay. Forrest Wilder, the senior editor at Texas Monthly, summed up major tax increases in Texas’s most popular metropolitan areas:
Residential appraisals are up 15 to 30 percent in Harris County, 20 percent in Tarrant County, 24 percent in Dallas County, 25 percent in Bexar County, and 53 percent in Travis County, and I could go on.
But you can temper those sharp increases with a tax relief measure provided by the state comptroller: a homestead exemption that lowers the taxable value of your home through several different avenues and tax levies. Here, we walk through the benefits of the homestead exemption that Texas makes available to homeowners simply by filing, why we recommend making this your top priority for managing your 2023 property taxes, and what else you can do to lighten the load.
Why Should You File for a Homestead Exemption?
Filing for a homestead exemption is a reasonably straightforward process. All you have to do is confirm that you meet the criteria and then fill out and submit the Application for Residential Homestead Exemption (along with any needed documentation). But if this is the first time you have encountered a homestead exemption, it can feel like another bureaucratic burden in the middle of the process.
How Do Property Taxes in Texas Work?
Texas doesn’t have state income taxes, so a lot of funding for schools, cities, and counties originates from property taxes within the geographic domain of a given tax authority. Your local tax district determines your tax bill by considering these two factors:
- The taxable value of your home
- The effective tax rate you pay, or the aggregate of the different levies your property is subject to (city taxes, local school district taxes, etc.)
Texas’s average property tax rate is 1.8%, which can vary yearly. But the more variable factor is your home’s assessed value, which can rise sharply in a hot market. The product of these two numbers is your property tax bill total. Suppose you own your property but have a mortgage (as most homeowners in Texas do). In that case, your lender probably has an escrow account on your behalf. Your monthly mortgage includes the loan (principal and interest), home insurance premium, and 1/12 of your estimated property taxes. This ensures you don’t have to suddenly come up with the money by January 31st when property taxes are due.
Some other important dates to keep in mind concerning property taxes are:
- April 1st: You will soon receive your Notice of Appraised Value, which declares your home’s assessed value for the year.
- April 30th: This is the deadline for filing a homestead exemption for the given tax year; if you submit it later, it will apply to the following year and beyond.
- May 15th (or earlier): Property owners or their representatives must protest property appraisal values within 30 days of notice delivery and by May 15th at the latest.
- October 1st: This is when property tax bills are issued to homeowners (though the exact date of availability will vary).
Reasons to Add a Homestead Exemption to Your To-Do List ASAP
Before we dive deeper into the benefits of the homestead exemption Texas homeowners get, here is a quick list of reasons you should apply.
- It’s easy: Most counties have an option for online filing and provide a quick link to the form. Filing for the exemption only takes a handful of minutes, making it one of the easiest ways to lower your property tax bill.
- It’s automatic: Once you file, the exemption is applied to your bill every year unless you move, refinance, or the exemption no longer applies to you or your property.
- You can check your status online: If for any reason, you need to remember whether you’ve filed for a homestead exemption and the status, it’s easy to check. Just visit your county’s County Appraisal District website and run a search for your address or your name. Your property’s profile will list any exemptions that currently apply to your property in the Owner Information section. Look for “HS (General Homestead)” to confirm.
- You can save hundreds of dollars with relatively little effort: Homestead exemptions have many benefits (which we discuss below). The clearest example is the $40,000 exemption for school district taxes. At approximately 1% or more for many homeowners, cutting down your school district tax obligations is significant. This one feature can cut your tax bill by about $400.
Let’s explore the benefits of the homestead exemption that Texas property owners receive in more depth.
Related: The Myths and Facts Surrounding the Property Tax Protest Process
5 Benefits of Homestead Exemption Texas Homeowners Enjoy
A homestead exemption does a lot of work to minimize your tax bill, shielding portions of the value from tax calculations and capping how much your property’s value can increase each year. Consider how these specific benefits can change your next bill:
1. Reduce Your Local School District Taxes Through a $40,000 Property Exemption
This is an automatic $400 savings for homeowners across the state. Local school district taxes hover around 1% for most counties, sometimes dipping into the 0.9% range or rising to 1.25%+. Regardless of the value of your home, a homestead exemption automatically removes $40,000 of that value from calculating this levy. If you have a $250,000 home, the school tax portion will be approximately $2,100 instead of $2,500; if you have a $400,000 home, the school tax will be $3,600 instead of $4,000.
2. Reduce the County Taxes You Owe for Roads and Flood Control
Just like you can remove $40,000 of your home’s value for your school district levy, you can deduct $3,000 of your home’s value from levies for both:
- Farm-to-market road maintenance, and
- Flood control measures
These savings are less significant than the first benefit, but they all add up.
3. Additional Exemptions for Special Circumstances
You can gain an additional $10,000 exemption for your school district taxes if you are a homeowner with disabilities or are 65 or older. That’s an additional approximate savings of $100. However, homeowners cannot double this exemption if, for example, they are 65 and have a disability. They must choose which exemption they want to have applied.
4. Cap Your Assessed Property Value to Keep Your Property Tax Bill More Consistent
The homestead cap, just like the school district tax exemption, is one of the most significant monetary benefits of having this exemption in place. Property values increase almost every year—it increased dramatically for most Texas metroplexes, reaching increased values of 19.8% percent or even higher in a single year. A homestead cap prevents your tax district from raising your home’s appraised value by more than 10% (excepting any value-positive improvements you’ve made to the property).
For example, suppose you have a $300,000 home and don’t have a homestead exemption. In that case, your county appraisal district may raise the value by 5%, 10%, 19.8%, or even higher based on their calculations and consideration of the market. At a 19.8% increase, your property value becomes $359,400. But if you have a homestead exemption in place, your district may raise the value by 5% or 10%—and that’s as high as it will go. Your property won’t increase to anything more than $330,000.
Note: This is just for the purpose of property tax calculations, so don’t worry about a property tax exemption hurting the potential resale value of your home. Market valuations and appraisals aren’t affected by county tax appraisals, and market prices often outstrip the amount you’ll see on your Notice of Appraised Value.
5. Homestead Exemptions May Help Protect Your Home From Foreclosure
Texas law protects homeowners from having their homesteads seized or foreclosed upon in many instances. While your homestead doesn’t have to be declared as such or have a document legally filed declaring it your homestead, having a homestead exemption can substantiate your claim that a property is in use as a homestead.
Related: Texas Property Tax Exemptions that Benefit Residential Homebuyers
Additional Strategies for Lowering Your Property Taxes
Homestead exemptions are a powerful tool for keeping property taxes reasonably low and consistent. But by reaping the benefits of homestead exemptions, Texas homeowners have access to only some ways to keep their property taxes fair. Another popular tool used by homeowners is a formal property tax protest. You have the right to protest your property’s assessed value if it was unfairly increased or doesn’t consider all the relevant factors. As a result of this protest, your property’s assessed value—and your property taxes—can be reduced to a more reasonable amount.
Access the Tax Relief Benefits of Working With Home Tax Shield
Navigating the tax process can be complicated, but don’t let the value of filing a homestead exemption and a formal property tax protest notice slip through your fingers. At Home Tax Shield, we help homeowners pursue tax relief. We can assess your property’s value, manage the protest process on your behalf, and more. Sign up today to start getting professional help with your 2023 property taxes!