Homestead Exemption - Everything You Need to Know!

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Before you purchase a house, there are a lot of financial factors to be taken into consideration. Memberships, utilities, down payments, closing costs, and maybe one of the most critical and long-standing, property taxes. Texas has some of the highest property taxes in the United States with the average property tax at roughly 1.6%. Those taxes are the primary source of revenue for local governments and fund local services like schools, water systems, and law enforcement.

How Does Property Tax Work?

Residential property tax is appraised annually by the district appraiser. The district appraiser is responsible for determining the current market value of all property within the district. Homes are appraised at the beginning of the year, and if you disagree with the findings of the appraisal, you can take it to the appraisal review board around the beginning of May.

Homestead Exemption

Before you purchase your home, you need to be aware of the Homestead Exemption act for the exemption act may adjust what type of home you buy and where you purchase your home. The homestead exemption allows you to save on property taxes by allowing you to exclude a portion of your home's value from your assessment. For example, your home is valued at $400,000, and you qualify for a $100,000 exemption, you will pay school taxes on the house as if it was worth $300,000. Additionally, the exemption limits increases of the total assessed value (the value you are taxed on) to 10% from year to year (so long the exemption stays on the property). This 10% increase limit excludes any improvements added by the property owner.

Not all homes qualify for the exemption. Only the homeowner’s principal residence qualifies for the exemption, termed residence homestead.

Residence Homestead: The homeowners must be an individual and use the home as his or her primary residence.

If you are 65 or older or disabled, there are other exemptions you could qualify for. A homestead can include up to 20 acres as long as the homeowner owns the land and its used for the purpose related to the residential use of the house. A homestead can be a separate structure, condominium or a manufactured home located on owned or leased land as long as the individual owning the home lives in the home.

Below is a list of the homestead exemptions available:

School taxes: All residence homestead owners are allowed a $100,000 homestead exemption from their home's value for school taxes.
County taxes: If a county collects a special tax for farm-to-market roads or flood control, a residence homestead is allowed to receive an exemption for this tax. If the county grants an optional exemption for homeowners age 65 or older or disabled, the owners will receive only the local-option exemption.
Age 65 or older and disabled exemptions: Individuals age 65 or older or disabled residence homestead owners qualify for an additional homestead exemption for school taxes, in addition to the $100,000 exemption for all homeowners. If the owner qualifies for both the exemption for age 65 or older homeowners and the exemption for disabled homeowners, the owner must choose one or the other for school taxes. The owner cannot receive both exemptions.
Optional percentage exemptions: Any taxing unit, including a city, county, school, or special district, may offer an exemption of up to 20 percent of a home's value. But, no matter what the percentage is, the amount of an optional exemption cannot be less than $5,000. Each taxing unit decides if it will offer the exemption and at what percentage. This percentage exemption is added to any other home exemption for which an owner qualifies. The taxing unit must decide before July 1 of the tax year to offer this exemption.
Optional age 65 or older or disabled exemptions: Any taxing unit may offer an additional exemption amount for taxpayers age 65 or older and/or disabled.

In short, to receive your exemption(s), you must own the property and be living in the property. You can apply any time after closing on the property to receive the tax benefits for this year. You must file by April 30th of the next year to get the exemption in time for the following property bill.

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To get the general $100,000 homestead exemption, you must file the Application for Residential Homestead Exemption within your appraisal district. You have up to 2 years after the taxes on the homestead are due. Once you file the application and receive the exemption, you do not have to file every year but be on the look out for a new application sent by your County Appraisal District as they may ask you to reapply every 5 years.

Collin County Appraisal District

250 Eldorado Pkwy | McKinney, TX 75069

469.742.9200

Collin County Homestead Exemption Form

Cooke County Appraisal District

201 N. Dixon Street | Gainesville, TX 76240

940. 665. 7651

Cooke County Homestead Exemption Form

Dallas County Appraisal District

2949 North I-35E | Dallas, TX 75247

214.631.0910

Dallas County Homestead Exemption Form