President's Column
Jan. 24, 2003

–distributed by Texas Association of REALTORS®

Texas homestead exemption: Don’t pay to get this free homeowner’s benefit

Once you’ve taken advantage of impossibly low interest rates and bought the home you want, you’ll be transported into a brave new world of property taxes, deductions and other advantages that come with owning your own piece of terra firma. Just think of the money you’ll save when you’re able to deduct mortgage interest and other expenses associated with homeownership – and the cash that goes into your pocket instead of the IRS’. It’s a great feeling – and you can get it every year around tax time.

One of these advantages is a homestead exemption, which reduces a homeowner’s overall taxes by lowering a home’s taxable value. General homestead exemptions are based on the home ownership and residency as of Jan. 1 of the tax year. All school districts in Texas offer a $5,000 homestead exemption, and some counties – or taxing units – offer a percentage exemption of up to 20 percent of a home’s assessed value. For example, in Travis County, homeowners can exempt up to the 20 percent value, but in Williamson County, there’s a cap of $2,000 on the house.

Counties, cities, road districts and municipal utility districts can all have different rates for the exemption; it just depends what the jurisdiction is in that county.

And it’s free!

Applying for a homestead exemption is a quick and easy process that will enable homeowners to significantly lower their property taxes. But if you haven’t yet taken advantage of this tax break, don’t fall victim to so-called “homestead exemption services” that charge fees ranging from $25 to $40 to file your exemption for you. The letters start arriving in the mail about this time of year, so don’t fall victim to something you can do for free. Or for the price of a stamp.

In Austin, the Travis County Appraisal District sends a massive mailing every year to new homeowners, reminding them to take advantage of the free exemption, but a lot of people don’t do it because they don’t really understand what it is. Then they’ll get a letter from one of these services that charges them for it and they’ll do it then.

Typically, these services charge the homeowner a fee, claiming they will be able to get them a refund of the tax liability they would have saved had they taken advantage of the exemption in the first place. While it is possible for a homeowner who has never filed an exemption to get a refund, you certainly don’t need to shell out money to do it.

There was a company in Dallas a few years ago that was charging homeowners who had never filed an exemption half of the refund they would have received for that tax year – as much as $200. Even in this day and age, that’s still a chunk of change, and the worst part it that it’s $200 that never had to leave your wallet in the first place. After all, why pay for something when you can get it for free?

Homestead exemption guidelines

As with most things related to homeownership, there are guidelines for filing a homestead exemption. You must own your own home and occupy it as your principal residence on Jan. 1 of the tax year. You can also have only one principal residence and one homestead exemption.

As far as deadlines for applying, most county appraisal districts prefer that homeowners apply by April 1, so status is reflected in the annual estimated property value statements sent out at the end of April.

If the estimated value is wrong, the homeowner can protest, so it’s wise to fill out the exemption and get it in early. As a homeowner, you’ll be able to see the big picture at one time.

Keep in mind that those who have never filed an exemption since they’ve owned their home can only go back to the previous year’s tax rolls. If you’ve owned your home for five years, you can’t go back five years – only to the past year – so it pays to apply for the exemption early.

In addition, homeowners who are 65 years or older on Jan. 1 are also entitled to an over-65 homestead exemption of $10,000 for school tax purposes. Once you receive an over-65 homestead exemption, you automatically qualify for a tax ceiling on your school taxes. If you don’t add any improvements, your school taxes will never increase from the amount you owed when you first qualified, even if the assessed value of the home increases.

There is also a disabled persons exemption, but homeowners cannot claim both over-65 and disabled person exemptions. Deadline for completion of these special exemptions is no later than April 30 in most districts.

Once you receive a general homestead exemption, you don’t need to apply again unless the appraisal office asks you to do so in writing. If you move to a new home, you will need to file a new application. If you pass your 65th birthday before Jan. 1, you will also need to file a new application.

So save your money, take a few minutes to apply for this free exemption, and you’ll be reaping the benefits in the next tax year. For more information, contact your local appraisal district or the Texas State Comptroller’s office, property tax division, at (800)252-9121.