A lot of people look to classify residence as a homestead because of the tax breaks. In Texas, this is one of the easiest ways to save on property taxes because they lower the tax value of your home.
You can only homestead one home in Texas because a homestead exemption can only be made on a principal residence. This single home property (plus up to 20 acres of land) must also meet specific criteria to be an eligible homestead residence.
There are several factors to consider when looking to qualify a property as a homestead and be eligible for tax exemptions. Read below for additional important information on what you need to meet the homestead qualifications in Texas.
Homesteading in Texas?
If you want to homestead your primary residence, you will need to make sure that the home is a principal residence as of January 1st of that same tax year. Also, to meet the requirements, the homeowner must be an individual. Homes owned under a corporation or other business entities are not eligible to qualify as a homestead.
Another thing to make sure you check before applying for a homestead exemption is that the property ownership meets one of these sole owner definitions:
- Married couples are eligible for the homestead exemption
- Inheritors of properties can qualify for a homestead as an heir property owner
- Partial ownership of a property can qualify (the exemption amount is based on the interest you own)
Whenever applying for any tax exemptions, it is always important to make sure you fully understand what the exemption is and what steps you need to take to qualify. It is also important that you consult with a tax advisor to make sure there are no negative implications based on your scenario.
What is a Texas Homestead?
A homestead is a tax exemption that can be done on a primary residence. This can be a separate structure, condominium, or a manufactured home that is located on owned or leased land. The homestead can include up to 20 acres of land if that land is used for residential use.
The tax exemptions that are available for having a homestead include:
- School taxes (general homestead)
- County taxes
- Age 65 or older and disability exemptions
- Optional percentage exemptions (city, special district, etc.)
Each of the above tax exemptions offered can be a different tax exemption amount. For instance, a homestead owner is allowed up to $25,000 exemption on their home’s value for school taxes. For county taxes, you can receive a $3,000 tax exemption for the special tax that counties collect for things like roads or flood control.
To qualify for a homestead exemption, you will need to fill out an application with your county appraisal district. The application form can be found on your appraisal district website. Also, if you have questions about the process, you can contact your appraisal district directly.
How Long Does Homestead Exemption Last?
After homesteading a property, you can receive tax exemptions based on the category you applied for. Once you receive the exemption, you don’t usually need to re-apply unless otherwise notified by the chief appraiser.
Homestead exemptions typically last until a homeowner moves or sells the property. If you move and don’t establish a permanent residence elsewhere, you can still receive the exemption if you intend to return to that home within 2 years (unless you are in the military).
How Homestead Tax Break Works
If you want to homestead your property, there are different categories that you can receive a tax exemption. The most common is the general exemption which gives you a tax exemption on school taxes.
How general exemption works is after you apply you can receive a $25,000 exemption. You receive this by your property tax value being lowered by $25,000. So, for example, you have a home with a tax value of $200,000 and you apply to homestead the property as a general exemption.
This general exemption will reduce the amount you need to pay in school taxes because it will reduce the taxable value of your home from $200,000 to $175,000. Meaning, you will pay school taxes on your home as if it were valued at $175,000.
There are other taxing unit exemptions and some you can receive an exemption up to 20% of the total value of your home.
Homesteading a property is a great idea if you have a home that is your primary residence because you can receive tax exemptions. However, in Texas, you can only homestead one property because it must be a primary residence.
There are several different options to receive homestead tax exemptions. The most common is the general homestead which gives you a tax exemption on school taxes. However, depending on your scenario, there might be other, more beneficial options.
It is always a sound idea to consult with a tax advisor to determine the best option based on your specific situation. Also, if you have any questions on the process, you can always contact your appraisal district directly to make sure you are completing the appropriate steps to homestead your property.