Everything is bigger in Texas, and that includes property taxes. Texas has the sixth highest property tax rate in the country, and the median property tax bill is $2,275. That’s almost 3% of the state’s median household income—and even that median tax bill amount includes the property tax exemption and protest processes that millions of residents across the state use every year.
To combat rising property taxes and ensure you’re facing a fair bill at the end of the year, it’s important to use multiple strategies. While an effective strategy is protesting your property’s appraisal value every year, another tactic is having a homestead exemption on your primary residence. An exemption works by removing (or exempting) part of an eligible property’s value from tax calculations so you see significant savings.
By reading this article, you’ll learn more about what a homestead exemption is and how it will likely change in the coming months. We’ll also explore how to apply for a homestead exemption and how to simultaneously use exemptions and protests to ensure your Texas property tax payments are as fair as possible every year.
Texas Homestead Exemption Explained
Property taxes across Texas have historically been higher than in other states because there is no state income tax. But to protect eligible homeowners from financial hardship, the Texas Comptroller and state legislature have enacted a series of exemptions. These include different provisions for:
- Senior citizens
- Disabled homeowners
- Homeowners with a primary residence in Texas
- Homeowners with an agricultural homestead.
The primary exemption is a homestead exemption that gives homeowners with a Texas primary residence a discount on individual levies that make up property taxes. There are two primary benefits that a Texas homestead exemption grants.
1. A Partial Exemption on Local School District Taxes
While ‘property taxes’ are generally presented as a lump sum, your property tax bill document will break down the amount into a series of individual levies, such as city taxes, county taxes, junior college taxes, and school district taxes. That last line item is often the largest and approximately half of your total bill (generally around 1–1.25% for many counties).
If you have a homestead exemption, you will currently have the first $40,000 of your home’s market value exempted from tax calculations, resulting in roughly a $400–$500 savings. In November 2023, voters will be deciding on a constitutional amendment that will allow the state legislature to make the exemption even larger (which we discuss more below).
2. A Cap on Assessment Value Increases
Every year, the County Appraisal District (CAD) that has jurisdiction over your property appraises your home value either through a direct appraisal or a series of calculations. In some years, the property value may stay the same, while other years will see an increase of 10, 15, or even 20%. This has happened to most homeowners across the state over the past several years.
But if you have a homestead exemption, a maximum of a 10% increase will be reflected on your tax assessment and final tax bill. For example, suppose you have a $350,000 home and your CAD increases its value by 15%—a value of $402,500. However, your County Tax Assessor will only calculate a 10% increase for a taxable value of $385,000.
While it’s important to keep both the appraisal value and taxable value low, this cap plays an important role in making tax costs predictable. In addition to these benefits, there are other ways to lower your annual property taxes.
Additional Savings
Local taxing units are required to offer an additional $3,000 exemption to homeowners in counties that collect flood-control or “farm-to-market” taxes, as outlined in the state of Texas tax code section 11.13(a).
Additionally, tax code section 11.13(n) allows local taxing units (including counties, school or special districts, and cities) a “local option” of offering an additional 20% of the property’s appraised value, but not less than $5,000. As you might expect, some taxing units offer this additional option in varying amounts. Similarly, there is a local option of an additional $3,000 for those 65 years or older and the disabled.
How Texas Homestead Exemptions Are Changing for 2024
Texas homeowners have faced an increasing amount of pressure because skyrocketing real estate values have made property taxes increasingly expensive. In acknowledgment of the rising costs, state legislators proposed a series of changes to the tax provisions. They currently hinge on a general population vote in November 2023 when residents will vote on an amendment to allow the government to make the changes. The proposed changes include:
- Raising the homestead exemption amount from $40,000 to $100,000—leading to approximately $1,000 in savings every year
- Starting a pilot program to allow most non-homestead properties to have a 20% value increase cap
Related: Texas Property Tax Laws Are Changing: Do You Still Need to Protest Your Taxes?
Should voters approve the measure, it will retroactively apply to 2023 tax calculations and be fully in place for 2024 calculations.
Who Is A Homestead Exemption In Texas Meant For?
The homestead exemption is a general exemption that applies very broadly. Any citizen with homeownership interest in a property of up to 20 acres located in a school district and who uses that property as their principal residence (i.e., not a vacation home) qualifies. This could include any separate inhabitable structure, like a condominium or manufactured house, whether the homeowner owns or leases the land it’s on.
The Texas Comptroller’s site explains that the home’s owner must be an “individual” and “not a corporation or other business entity.” For those who are only partial owners of a principal residence in Texas, there are several considerations that may affect the eligibility for the exemption.
For example, married couples will each have 100% ownership. If there are several property heirs, one may be considered the sole owner for the purposes of the exemption. In other cases, partial owners simply receive a percentage of the exemption matching the percentage of their property ownership.
These are the general rules set by state officials, but the state gives local taxing units a certain amount of discretion over some other requirements and exemption amounts. As a result, there may be further qualification elements to the process.
How To Apply For Texas’s Homestead Exemption
It’s about as easy as it is general, and you’ll need to fill out a Residential Homestead Exemption application (you can download the PDF here). The application is fairly straightforward, but here are some aspects that may require additional research or documentation to complete it:
- The date you acquired the property
- Either the filing number of the ownership instrument, such as the deed, or other documents, including an affidavit, verifying rightful inheritance of the property
- A copy of the property owner’s driver’s license or state-issued personal identification certificate
Note that the application states that the ID or certificate must contain the principal address for which the exemption is being applied. There are some specific exemptions, such as those who reside in certain facilities (e.g., military barracks) or those participating in an address confidentiality program.
The completed application and supporting documents must be sent to the appraisal district office in the county where the property is located. According to the instructions, applications for homestead exemptions may be sent up to two years after the filing deadline, or five years for disabled veterans.
In some cases, it’s possible for the Chief Appraiser at the appraisal office that receives your application to require additional documentation. If so, you’ll need to fulfill these requirements within 30 days of the request or be denied.
Can The Homestead Exemption Be Revoked?
Sometimes, homeowners can lose homestead exemption eligibility. The homestead exemption program applies even if you temporarily leave the home while still maintaining ownership of it. However, you cannot establish another principal residence somewhere else. You must return to the principal residence within two years (with exceptions for those in the military and those living in an assisted living facility).
Other Property Tax Exemptions for Eligible Property Owners
In addition to the homestead exemption, several other tax exemptions are available in Texas. Like the methods for collecting property taxes, the terms and qualifications of the exemptions vary between localities. The following are general property tax exemptions you can look into applying for, which you can read more about in Chapter 11 of the Texas Tax Code.
Exemptions For Senior Citizens And Disabled People
This is the same $10,000 exemption that is offered as an addition to the homestead exemption but without needing to qualify for the homestead exemption. You may qualify if you are at least 65 years old and/or disabled but only the property owner of a second house, only own property through a corporate entity, or your principal residence is on more than 20 acres.
Related: What You Need To Know About Exemptions For Texas Homes
To apply for these exemptions, fill out and submit the senior citizen exemption form and disability exemption form, respectively.
Exemption For Disabled Veterans
Veterans who have suffered serious injuries can receive a disabled veteran exemption based more or less in proportion to the severity of the injury. It works by assigning a disability rating as a percentage of the amount of function lost to the injury. Age also increases the amount of the exemption available.
Together, the disability and age ratings show how much of the exemption the applicant qualifies for, with the maximum amount being $12,000.
Exemption For Veteran’s Surviving Spouse
The same exemption the veteran received is given to the spouse, so long as he/she does not remarry. This exemption also applies to the veteran’s children.
Another Way to Save Money on Property Taxes: Protest Your Home’s Appraisal Value
You may be wondering, “What is a homestead exemption in Texas good for if I want to protest my property taxes?” It’s important to know that protesting the amount of taxes is simply a legal way to ensure the local authorities are only collecting the fair amount of taxes they are allowed to collect by law. Nothing more.
How can you protest your property taxes? In the spring, homeowners will either receive a Notice of Appraised Value or be able to look up their home’s appraised value online at the County Appraisal District website. If you believe the amount is unfairly high or inaccurate, protesting the amount consists of three steps:
- File a protest notice
- Provide evidence to support your claim
- Pursue a lower valuation amount through conversations, informal negotiations, and a formal hearing process in front of a review board.
You can also appoint a trained professional or a tax protest service to complete all of the steps on your behalf.
This process focuses on the appraisal value, not the assessment value (which is protected by the exemption cap) or your property tax bill total. Instead, it tackles potentially unfair and burdensome increases early on in the total property tax calculation process.
Therefore, a homestead exemption (or any property tax exemption) is perfectly compatible with other attempts to reduce tax payments. In fact, it’s best to pursue a multi-pronged approach to reducing your taxes—taking advantage of possible exemptions and protesting your property taxes to ensure they are calculated accurately and fairly.
Beyond Exemptions: Start Your Property Tax Protest Today
Protecting your home and personal finances is important, and one of the best strategies for doing both is to stay on top of your property taxes. This includes the appraisal values, the increases, and the processes the government has set up for protesting and correcting problems with property tax calculations.
At Home Tax Shield, we’re here to help you do precisely that. Our team can calculate a fair appraisal value for your property every year, compare it to the CAD’s new value, and manage the protesting process on your behalf to ensure the appraisal value doesn’t creep out of control. We can provide this service every year on a recurring basis so you know your property taxes are as fair as possible. Sign up today to take property tax management off your to-do list.