Texas Homestead Laws date back to 1839 when many families lost their homes and farms through foreclosures after the 1837 depression. In order to preserve the integrity of the family, to provide the family with a home and to keep the family from becoming a burdensome charge upon the public welfare, certain homestead protections became a part of the State constitution.
In the context of residential property, the homestead is owned and occupied as the home and is protected from forced sale for general debts. Only certain types of liens are valid against the homestead, and these include:
- To finance the purchase of the homestead
- To pay taxes due on the homestead
- To obtain money for work and material to repair or renovate existing improvements
- For owelty of partition liens, including divorce or probate
- For refinancing a federal tax lien
For home equity loans as defined by Section 50 (A) (6), Article XVI of the Texas Constitution
Certain types of documentation are required to establish each type of lien on the property. In order to prevent the legislative branch of the government from casually changing the homestead exemption, the exemption was incorporated into the constitution in 1845. Now, only constitutional amendments may change the substance of the exemption, such as with the recent home equity legislation. There are limits to the extent a homestead is protected. An urban homestead may be up to one acre of land in one or more parcels. A rural homestead may be up to 200 acres for a married couple (100 acres for single persons) in one or more parcels. The improvements on the land are unlimited as to dollar value. Homestead rights cannot be waived by the property owner; however, if the property is in excess of that allowed by law, the owner may designate that portion of the property which is homestead.
A Homestead Exemption Helps You Save on Your Property Taxes
An exemption removes part of the value of your property from taxation and lowers your taxes. For example, if your home is valued at $100,000 and you qualify for a $10,000 exemption, you pay taxes on your home as if it was worth only $90,000.
What Kinds of Homestead Exemptions Are Available?
School taxes — all homeowners.
If you qualify for the homestead exemption, you will receive at least a $15,000 homestead exemption on the value of your home for school district taxes.
- County taxes — all homeowners.
Each county provides a percentage optional homestead exemption to all homeowners. This means that what ever your home is valued at, the exemption will reduce the taxable value by the percentage. see tax codes in your county
- Optional exemptions — all homeowners.
Any taxing unit, including a school district, city, county or special district, may offer an exemption for up to 20% of your home's value. The amount of an optional exemption can't be less than $5,000, no matter what the percentage is. For example, if your home is valued at $20,000 and your city offers a 20% optional exemption, your exemption is $5,000, even though 20% of $20,000 is just $4,000.
The governing body of each taxing unit decides whether it will offer the exemption and at what percentage. This percentage exemption is added to any other homestead exemption for which the applicant qualifies.
In general, the last day to apply for a homestead exemption for the year is April 30 of that year. If you mail an application, it should be postmarked by that date. However, if you missed the deadline you can still apply:
For a general or disabled person's exemption: up to one year after the earlier of: (a) the date you paid taxes for the year or (b) the date taxes became delinquent for the year (usually February 1 of the year following the tax year). For example, if you paid taxes on December 31, 2020 for the 2020 tax year, you could still file an application through December 30, 2021. On the other hand, if you waited to pay your taxes for 2020 until after February 1, 2021, you could still file an application through January 31, 2022.
For an over-65 person: the later of: (a) the deadline described in the paragraph above or (b) one year from the date you acquired the property or turned 65. Note that if you turn 65 or acquire a property during the year, you can apply and have over-65 exemption activated for that year. On the other hand, the general and disabled person's exemption require that you qualify as of January 1 of the year. In most cases, this means that the exemption will be applied as of January 1 of the year after you qualify.
An additional benefit of the general homestead exemption, especially in the current housing market, is the homestead cap, or limitation on increases in appraised value. The cap applies to your homestead beginning in the second year you have a homestead exemption. The cap law provides that if you qualify, the value on which your taxes will be calculated (called your appraised value) cannot exceed the lesser of:
- This year’s market value; or
- Last year’s appraised value, plus 10% for each year since the last reappraisal, plus the value added by any new improvements made during the preceding year.
Over- 65 Homeowners
A person who is 65 or older may receive additional exemptions. You are eligible for these exemptions as soon as you turn 65; you don’t need to be 65 as of the first of the year to apply. School districts automatically grant an additional $10,000 exemption for qualified persons who are 65 or older. An additional advantage of the over-65 exemption is the school tax ceiling. Once you qualify, your school taxes will not increase unless you make improvements to the home. Other taxing units may, but are not required to, offer additional over-65 homestead exemptions of at least $3,000 and sometimes much more. Call your county appraisal district to determine what taxing units in which your home is located offer an over-65 homestead exemption.
Homeowners with Disabilities
A person with a disability also may get exemptions. "Disabled" means either (1) you can't engage in gainful work because of physical or mental disability or (2) you are 55 years old and blind and can't engage in your previous work because of your blindness. If you receive disability benefits under the federal Old Age, Survivors and Disability Insurance Program administered by the Social Security Administration, you will qualify.
Disability benefits from any other program, including a disabled veterans' pension, do not automatically qualify you for this exemption. You may need information on disability ratings from the civil service, retirement programs or from insurance documents, military records or a doctor's statement. Also read information about the disabled veterans' exemption.
If disabled, you will qualify for a $10,000 exemption for school taxes, in addition to the $5,000 exemption for all homeowners. Any taxing unit can offer an exemption of at least $3,000 from the home value of disabled homeowners. Call your county appraisal district to determine what taxing units in which your home is located offer a disability homestead exemption.
Selling or Buying a Home with an Existing Homestead Exemption
When you sell or buy a home, the taxes for the year will generally be prorated at the closing. This doesn't actually change your tax liability; the tax assessor will calculate that later in the year. The proration at closing will be based on estimated taxes due. You should be aware of the rules regarding homestead exemptions so that you are prepared if your actual tax liability turns out to be different.
If you buy or sell a home that has only a general homestead exemption on it, the exemption stays in place for that entire tax year. The final taxes for the year will reflect the exemption. However, the new owner will have to qualify for the exemption by filing an application in his or her own name for the following year. The same is true if a disability exemption applies to the home. If the home you buy has had a cap in place for several years, be aware that the value of the home, and the taxes, may increase substantially in the year following the year you purchase it. This is because your cap won't take effect until the second year after you purchase the home.
If you buy or sell a home that has an existing over-65 exemption, the rules are different. Whether the over-65 exemption stays in place depends on whether the person who qualified for that exemption transfers it to a different homestead during the same year.
- If the over-65 person does not establish a homestead exemption on a different homestead, the exemption stays in place for the entire year.
- If the over-65 person does establish a homestead exemption on a different homestead, then when the tax assessor calculates taxis on the sold home for the year, the assessor will prorate the taxes to reflect the over-65 exemption for only the portion of the year that the over-65 person owned it. In short, if the seller is over 65 and establishes an exemption on a different home, taxes for the year will be higher than they would be if the seller does not establish another homestead exemption.
- If both the buyer and the seller are over 65, the buyer can avoid the proration problem by applying for the over-65 homestead exemption in his/her own right.
In the first quarter of each year, your county appraisal district develops a list of all properties with a prior year homestead exemption which, during that same year, were sold to a new owner. Then, as required by law, the district cancels the old exemption as of January 1 of the new year and mails the new owner an exemption application form. However, you should act to protect your rights by ensuring that we have transferred ownership of the new home and that you have timely filed the homestead exemption application.