The Texas homestead exemption benefits homeowners in three distinct ways. For most homeowners, it reduces their property taxes by approximately 20 percent. The exemption also caps valuation increases at 10 percent annually. If a home worth $200,000 has increased in market value to $250,000, for example, its valuation for property tax purposes cannot exceed $220,000. This way, it can take several years for the tax value to match the market value. For those who must file bankruptcy, the homestead exemption allows them to keep their home. While the Texas homestead exemption pertains primarily for those who occupy their homes, there are certain exceptions, although most of them are temporary.
Generally speaking, you will only be able to use the homestead exemption on a property that is classified as your primary residence. This means that you will need to reside on the premises.
The Texas Homestead Exemption
The homestead exemption is available only for your principal residence. Vacation or rental properties are not covered under the exemption, nor are properties owned by corporations rather than individuals. The homestead exemption lowers the value of a property by $25,000 for school tax purposes. For example, if a home is worth $200,000, the value is considered just $175,000 when it comes to school tax considerations. Other taxing units, such as the county or city, may offer optional exemptions of up to 20 percent of a home’s value. Available exemptions vary by local jurisdictions.
Homestead exemption applications require annual filing between Jan. 1 and April 30. Eligible applicants must live in the home as their primary residence as of Jan. 1 of the tax year, although those over age 65 or who are disabled qualify for the exemption if they do not own and reside on the property as of Jan. 1. Seniors and people with disabilities may receive an additional $10,000 exemption from school tax valuation.
Any type of home is eligible for the exemption, from condos to manufactured homes. The homestead exemption may include up to 20 acres if those acres relate to the property’s residential use.
Texas permits homeowners to keep their homestead exemption if they move away on a temporary basis. This exception pertains to residents who don’t establish a primary residence anywhere else and are not gone from the homestead for more than two years. Once the two-year period is up, the homeowner may no longer receive the exemption unless they are serving in the military or living in a nursing home or another facility providing services to those who are sick, injured or aged. You can rent out your home temporarily and still receive the exemption as long you do not establish another principal residence.
- Nolo: The Texas Homestead Exemption
- Comptroller of Texas: Residence Homestead Exemption Frequently Asked Questions
- Harris County Appraisal District: Property Tax Exemptions for Homeowners
- Congressional Research Service. "Homestead Exemptions in Bankruptcy After the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA)," Summary Page. Accessed April 17, 2020.
- Institute on Taxation and Economic Policy. "Property Tax Homestead Exemptions." Accessed April 17, 2020.
- Connecticut General Assembly, OLR Research Report. "State Homestead Exemption and Credit Programs." Accessed April 17, 2020.
- Congressional Research Service. "Homestead Exemptions in Bankruptcy After the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA)," Pages 4-46. Accessed April 17, 2020.
- Congressional Research Service. "Homestead Exemptions in Bankruptcy After the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA)," Pages 9 and 41. Accessed April 17, 2020.
- U.S. House of Representatives, Office of the Law Revision Counsel. "11 USC 522: Exemptions." Accessed Feb. 2, 2020.
- Federal Register. "Revision of Certain Dollar Amounts in the Bankruptcy Code Prescribed Under Section 104(a) of the Code." Accessed Feb. 2, 2020.
- Congressional Research Service. "Homestead Exemptions in Bankruptcy After the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA)," Pages 31 and 36. Accessed April 17, 2020.
A graduate of New York University, Jane Meggitt's work has appeared in dozens of publications, including Sapling, Zack's, Financial Advisor, nj.com, LegalZoom and The Nest.