Homeowners with a homestead exemption can save around $1,200 a year on property taxes. Considering Texas has one of the highest property tax rates in the country, that new savings potential (double what homeowners may have seen in previous years) is a welcome sight for residents.
At the same time, however, it may not be enough. Homeowners have seen their property tax bills skyrocket over the past few years due to rising property values and an increased demand for funds across city and county budgets.
If you own your primary residence in Texas and want to reduce your property tax bill as much as possible, filing for a homestead exemption is the first step. It grants you access to benefits like the partial exemption on school district taxes and a cap on taxable value increases year over year. But it’s far from the only step you can take to maximize both benefits and your overall savings potential.
What Is a Homestead Exemption and Cap?
The Texas Property Tax Code includes measures for giving property tax relief to homeowners who have a primary residence within the state. This primarily encompasses exemptions for qualifying homeowners. The four most common types are:
- General homestead exemption: By filing a homestead exemption, you receive a $100,000 exemption on your property’s taxable value for the purpose of calculating school district taxes. You also receive a cap on your home’s taxable value so it can’t increase by more than 10% in a given year (aside from any improvements you’ve made to the property that may increase its value).
- Over-65 exemption: This is a supplement to the general homestead exemption. While it offers multiple advantages, the main benefit is that it increases your exemption amount by $10,000 and sets a freeze on the total amount you pay in school district taxes.
- Disabled exemption: This offers the same $10,000 supplemental exemption as the over-65 exemption, but homeowners can only hold one of the two at a time. There are additional protections for disabled veterans.
- Agricultural exemption: This is not an exemption but rather an alternative way to calculate taxes that can save homesteads significant amounts of money if the property qualifies.
Related: Tax Protest Strategies: How to Lower Your Property Taxes Effectively
While the exact value of the exemptions differs across the various designations, the foundational general homestead exemption gives homeowners these two key benefits: the school district tax exemption and the homestead property value cap.
Benefits of Having a Homestead Exemption in Place
Homestead exemptions are a passive but extremely strong layer of defense against rising property taxes. The benefits you get once you have one in place include:
- An automatic reduction in your school district tax obligations: In many counties, the school district tax rate is 1% or higher. So, an exemption of $100,000 results in a savings of at least $1,000 each year.
- Your taxable property value won’t increase by more than 10% unless you make improvements. For example, a $300,000 taxable value can only increase to $330,000 the following year. This caps the potential costs and makes your taxes much more predictable. Keep in mind that your taxes can increase by 10% every year until they hit market value—unless you protest your taxes.
5 Tips on Maximizing the Benefits of a Homestead Exemption and Cap for Saving on Property Taxes
Trying to maximize your potential property tax savings can be overwhelming, especially because the process differs slightly from county to county and requires a lot of detailed knowledge. Use these five tips to get started.
Tip 1. Make Sure Your Homestead Exemption Is on File as Soon as Possible
Homeowners don’t automatically receive a homestead exemption. Instead, you have to file the paperwork and submit documentation to your local government. Call or visit your county website to get more details on what processes and deadlines you need to follow. If you’re moving to a new home, it’s generally best to file the paperwork as soon as possible so the county appraisal district and tax assessors have access to the information.
Filing your homestead exemption is a one-time task. Once it’s in place, it shouldn’t be removed unless the title changes. For example, moving away from your home and using it as a second home or a rental property means it’s no longer eligible for a homestead exemption. However, you can double-check your status on your county appraisal district’s website to make sure the exemption is on your property profile.
Tip 2. Be Ready to File for Other Exemptions That May Apply to You
You may be eligible for other exemptions, such as the over-65, disabled, ag, or disabled veteran exemptions. Once you qualify, you have to submit the documentation and supporting evidence on your own.
Some counties automatically apply the over-65 exemption once homeowners are eligible to receive it. But it’s always best practice to confirm for yourself and follow up if you don’t see the right ones on your property profile.
Tip 3. Know That Second Homes and Other Properties Also Have a Taxable Value Cap Now
While only your primary residence is eligible for the general resident homestead exemption, the property tax measures passed in 2023 allow other properties to have a 20% property increase cap. This means your second homes, rental properties, and many other types of real estate will not increase in taxable value by more than 20% within a given year, provided they are worth less than $5 million.
Tip 4. Protest Your Property Taxes So the Appraisal Doesn’t Outpace the Taxable Value
Every year, protest your property taxes by appealing the new market value declared by your county appraisal district. Every spring, the local office appraises or algorithmically calculates your home’s assumed market value, and you have a brief window across April and May to file a protest form. You can propose a new (lower) value, provide evidence to support your position, and pursue the matter until you have a formal hearing in front of an appraisal review board (ARB).
It’s important to complete this step every year so your home’s appraisal doesn’t climb out of control with nothing to stop it. This value must stay low for you to maximize the practical value of your exemption and cap. If the appraisal climbs too high, you might see property tax increases even in years when the market stagnates or goes down.
Related: Property Taxes in Texas: How to Keep More Money in Your Pocket
There is an alternative to this step. Instead of filing the protest notice and representing yourself in the hearing, you can appoint a representative to do it for you. If you hire a property tax protest service, experts in the industry can:
- Assess your property to calculate a more reasonable home value.
- File the protest notice and supporting documentation.
- Handle communications with the appraisal office.
- Represent you in the hearing.
Just like any formal proceedings, hiring an expert can help you present a stronger case and see greater savings. It also means you’re less likely to forget a deadline and miss the chance to protest in any given year.
Tip 5. Take Action Before the Spring Property Tax Protest Season
All of the above steps are important—and the best practice is to handle them well in advance. The sooner you have your exemptions in place, the sooner you can access the long-term compounding benefits. With prompt action regarding protesting taxes or hiring a service, you’re less likely to miss any critical deadline or feel stressed about upcoming due dates.
With Exemptions in Place, Protest Your Taxes to Maximize the Savings
Once you file a Homestead Exemption, the savings are automatic. The way to keep the savings coming is to protest your property taxes every year. Protesting your taxes is one of the single most impactful ways to keep your property tax bills in check over time. By lowering the appraisal value, you can indirectly lower your taxable property value. At Home Tax Shield, we can manage the entire property tax protest process for you. Just sign up once, and we’ll protest on your behalf year after year so you don’t have to add it to your to-do list every spring. Sign up today to make sure your 2024 property taxes are protested by experienced professionals.