Texas has proudly had homestead laws for the last 175 years or so. They were incorporated in the Texas Constitution of 1845 when Texas first became a state. They were so important that they ranked right up there with the provision forbidding any citizen who has ever participated in a duel from holding office (Article VII, Sec. 5).
While laws about duels may be more interesting, this column is going to focus on using your homestead to save money.
What Are Homestead Exemptions?
Most Texas homesteads are subject to property taxes imposed by local governments. Property tax ranks as one of the biggest expenses of owning residential real property.
To remove some of the tax burden from people who own and live on their property, Texas and local governments give homestead exemptions. Those remove part of the home’s value from taxation. Lower value means lower taxes.
Types of Homestead Exemptions
There are several exemptions. Counties are required to grant a $3,000 residential homestead exemption. School districts are required to grant a $100,000 residential homestead exemption. Taxing units can vote to add even more exemptions.
If you are 65 or older, or disabled, then you get additional exemptions. School districts are required to grant you a $10,000 homestead exemption. School districts also have to “freeze” your taxes unless you make bona- fide improvements to your residence.
A homestead has protection from a huge increase in value. The taxable value of your homestead is limited to a 10% annual increase (except for valuing improvements).
To get the benefit of this governmental largesse, you just need to make sure your property is registered as your homestead with the appraisal district in each county where your property is located.
Registering for a Homestead Exemption
There is a handy government document to register for a homestead exemption: Form 50-114. You can register for exemptions for general residence homestead, disabled person, person aged 65 or older (or surviving spouse), and several exemptions regarding veterans. You should register between January 1 and April 30 for taxes that will be assessed for that year and thereafter. Those 65 or older get a 2- year registration grace period, and those filing for a veteran exemption get a 5-year grace period.
You only need to register once for an exemption for a particular property. You do not need to register again when you turn 65 to claim that additional exemption, if your birthdate information is included in the appraisal district records or in the information the Texas Department of Public Safety provided to the appraisal district.
The homestead exemption application form contains more details about the exemptions.
Property Tax Deferral
Now for a little-known perk for homeowners who are disabled or over 65: property tax deferral. You can defer payment of residential homestead taxes until 180 days after the property ceases to be your residential homestead. The taxes don’t go away; they just do not have to be paid now. This method is not without a cost, because the unpaid taxes accrue interest at the rate of 5 percent per year. However, there is no penalty for nonpayment, and a tax deferral can free up funds that are needed now to cash-flow living expenses.
To obtain the deferral, you must complete Form 50-126 and file it with the appraisal district office in the county in which the property is located.
Your homestead designation has value. If you don’t have a homestead exemption, then you should apply for one. You should also consider protesting your property tax valuation every year.
Don’t leave money on the tax table.
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Virginia Hammerle is an accredited estate planner and represents clients in estate planning, probate, guardianship and contested litigation. She may be reached at legaltalktexas@hammerle.com. This column contains general information only and does not constitute legal advice.
