Beyond Homestead Exemption: Lesser-Known Tax Exemptions in Texas
There are three critical tools every homeowner in Texas needs to fight for fair property taxes: property tax protests, exemptions, and the knowledge or resources to use both tools properly. Many Texans protest their property taxes every year, either by themselves or with the help of tax professionals. This step alone can help you see significant tax savings. Tax exemptions are also valuable tools, as you can file for reductions on your property tax bill that you’re entitled to due to property ownership, age, disability status, and other factors. Since the average Texan pays approximately $3,797 in property taxes (or more than $300 a month if you have an escrow account), using every tool at your disposal is essential.
While many homeowners know about—and may already have—a general residence homestead exemption, there are additional exemptions you may be entitled to that can whittle down your tax bill and even cap increases in your tax bill over time. Keep reading to learn more about property tax exemptions and some lesser-known examples you might qualify for.
What Are Exemptions, And How Do They Decrease Property Tax Obligations?
Through property tax exemptions, Texans can remove part or all of their obligation to pay taxes under different levies. Each exemption offers a benefit and has specific requirements that property owners must meet before being able to qualify. For example, a homeowner with a $350,000 home may waive school district tax obligations for $40,000 or $50,000 of that value, which reduces the total amount of their bill.
These measures are not the same as appealing your property tax valuation or reducing the appraisal value. Homeowners aren’t lowering their property value from $350,000 to $310,000 or $300,000. Instead, exemptions simply withhold part of that $350,000 from calculations. The more exemptions you or your property have, the more savings you will realize on your bill in the fall.
To see which exemptions you currently have in place, you can visit your local appraisal district website and search for your property or reach out to the appraisal district office directly. You may already have an exemption in place or discover that you’re currently eligible for exemptions that aren’t active on your property profile. If so, you can file the appropriate exemption form and any required supporting documentation to get them in place.
The timelines for when tax exemptions need to be in place can be complex, so handling the process as promptly as possible is essential. However, once you receive an exemption, they often stay active until circumstances change and you no longer qualify; you don’t have to reapply year after year for most options.
The Most Common Example: The Homestead Exemption
The most commonly used exemption is for general homestead. This tax relief measure is available for qualifying homeowners who own a primary residence in Texas. The exemption offers many benefits, but there are two key ones:
- School district levy exemption: This exemption removes $40,000 from your home’s value for calculating school district taxes (which is often the majority of your tax rate). For example, if you own a home in an area with a 1.25% school district tax, you can save $500.
- Property value increase cap: Under the homestead exemption, your property’s appraised value cannot increase by more than 10% after the first full year (excluding any increases due to property improvement projects or renovations). So if your home was worth $350,000 the previous year and the county appraisal district finds its value is $415,000 this year, it can only raise it to $385,000. That’s a $30,000 difference, saving you $570 if you live in an area with a 1.9% total property tax rate.
These savings are under the general residence homestead exemption, and Texas offers several other options for qualifying residents.
Related: 5 Benefits of Homestead Exemption Texas Homeowners Can Use
6 Lesser-Known Tax Exemptions
While most homeowners may have heard about the homestead exemption, they’re less familiar with the options available for specific portions of the home-owning population across the state. Read through these six additional property tax exemptions to see which ones you may qualify for:
1. Over-65 Exemption
There is an option available for homeowners over 65 and spouses of homeowners over 65 years old, and it acts as an addendum, or additional savings, to a general residence homestead exemption. If you qualify for an over-65 exemption, the amount of your home’s value removed from school district tax calculations increases from $40,000 to $50,000. Your local area may also offer an additional exemption value of $3,000, based on your location.
A secondary benefit of this option is the cap on school district taxes: whatever amount you pay the year you become eligible for the over-65 exemption becomes that “capped” amount for subsequent years. This ceiling rolls over as a proportion if you move.
If you’re a surviving spouse of someone with an over-65 exemption, you can continue to receive the benefits provided you are over 55.
2. Exemption for Homeowners With Disabilities
The exemption for homeowners with disabilities is very similar to the over-65 option. Eligible homeowners will also receive a $10,000 increase in property value waived from school district taxes (for $50,000 total). It also enacts a tax ceiling for school district taxes based on the year of initial eligibility for the savings. However, property owners cannot receive reduced tax obligations from the over-65 exemption and the disabilities exemption simultaneously.
3. Disabled Veteran Exemption
Eligibility for a disabled veteran exemption—and the accessible level of savings—are determined by the applicant’s disability rating under the VA.
These are the exemption tiers based on the disability rating:
- 10-29% rating: $5,000
- 30-49% rating: $7,500
- 50-69% rating: $10,000
- 70-100% rating: $12,000
Qualifying residents with a 100% disability rating are exempt from all property taxes. Surviving spouses of veterans killed in duty are also eligible for exemptions.
This exemption is uniquely flexible compared to other exemptions. Unlike the other measures, which must be applied to the property owner’s primary residence only, this exemption can be used for any property the disabled veteran owns in Texas, even if they live in a different property.
4. Agricultural Exemption
Technically not strictly an exemption, the agricultural exemption is a different method of calculating property value. For most properties and homesteads, the appraised property value is loosely based on the market value. However, for qualifying agricultural homesteads, the property’s value will be calculated based on its productive agrarian value, which results in a much lower appraisal value and, through that, a lower tax bill. Different counties can set specific eligibility rules regarding eligible agricultural properties but generally need at least 10 acres.
Related: What Is the Texas Agricultural Property Tax Exemption, and How Can It Help Lower Property Taxes?
5. Surviving Spouses of First Responders Killed in the Line of Duty Exemption
Texas also has tax exemptions for qualifying surviving spouses of first responders killed or fatally injured while providing services. This tax exemption is an absolute property tax exemption and will remain in place unless the surviving spouse remarries.
6. Inherited Residence Homestead Exemption
For most property tax exemptions, qualifying homeowners must have 100% ownership interest in the property, alone or with their partner. For these purposes, you would have 100% ownership interest in your property even with a mortgage. However, if someone is an heir to a property that is split among multiple inheritors, they can apply for an exemption with the consent of the other property owners.
How Your Property Tax Assessment and Exemptions Affect Each Other
Exemptions can help you save money on property taxes by excluding some appraised value from tax calculations. However, you can save even more money by reducing that appraised value by protesting your property taxes. If you can protest your home’s value as appraised by your local district, for example, reducing it from $450,000 to $425,000, the subsequent reductions via exemptions result in even more savings.
Protest Your Property Taxes With Help From Home Tax Shield
While you file for your exemptions, let our team get to work managing the property tax protest process. Our team of property tax professionals can assess your home and determine what its value should be. Then we can file your property tax protest form on your behalf and handle the communications, informal meetings, and official hearings. We’re here to help ensure you’re paying a fair property tax bill, and that starts by confirming your appraised value isn’t higher than it should be. Sign up today to get started for 2023.