Texas Homestead Considerations

What is the Texas residence homestead exemption?

The residence homestead exemption takes part of your home's value out of taxation, which can lower your property taxes. It's for a home you own and live in as your principal residence.

Texas law requires school districts to give this exemption. Any taxing unit, such as a city or county, may also choose to offer its own local option homestead exemption.

The chief appraiser at your appraisal district decides whether a property qualifies for an exemption.

Sources: Texas Comptroller of Public Accounts, "Property Tax Exemptions"; Texas Legislature, "TAX CODE CHAPTER 11. TAXABLE PROPERTY AND EXEMPTIONS (Sections 11.13, 11.26, 11.42, 11.43, 11.431)"

Who qualifies for the residence homestead exemption?

To qualify for the residence homestead exemption, you must have an ownership interest in the home and live in it as your principal residence. You also have to state that you don't claim a homestead exemption on any other home, in Texas or anywhere else.

The home must also meet the Tax Code's definition of a residence homestead. In short, it's a structure, including a mobile home, that people own and that's built or adapted for people to live in. An owner must live in it as their principal residence, and it can include up to 20 acres of land and the improvements used with the home, if they have the same owners.

An heir who inherited the home but isn't named on the deed has to give the appraisal district extra papers. These include an affidavit showing an ownership interest and a copy of the prior owner's death certificate.

Sources: Texas Comptroller of Public Accounts, "Property Tax Exemptions"; Texas Legislature, "TAX CODE CHAPTER 11. TAXABLE PROPERTY AND EXEMPTIONS (Sections 11.13, 11.26, 11.42, 11.43, 11.431)"

How and when do you apply for the homestead exemption?

You apply for the residence homestead exemption with the appraisal district in the county where the home is. The form is Form 50-114, the Application for Residence Homestead Exemption, and the general deadline is before May 1.

If you buy a home after January 1, you may get the exemption for part of that tax year. It can start once you qualify, as long as the previous owner didn't get the same exemption that year. In that case, the Tax Code says to apply before the one-year anniversary of the date you became the owner.

A late application can still count. In most cases, the chief appraiser must accept and rule on a late homestead application filed up to two years after the home's taxes became delinquent.

Once you have the exemption, you don't have to apply again each year. It stays in place until the home changes owners or your eligibility changes. The chief appraiser can ask you to file a new application in some cases.

Sources: Texas Comptroller of Public Accounts, "Property Tax Exemptions"; Texas Legislature, "TAX CODE CHAPTER 11. TAXABLE PROPERTY AND EXEMPTIONS (Sections 11.13, 11.26, 11.42, 11.43, 11.431)"

What exemptions are there for people 65 or older or disabled?

Texas law requires school districts to give an extra homestead exemption to homeowners who are 65 or older or disabled. Any taxing unit may also offer its own local option exemption for them.

To qualify for the age 65 or older exemption, you must be 65 or older, have an ownership interest in the home and live in it as your principal residence. For the disability exemption, you must meet Social Security's definition of disabled for disability insurance benefits. Disability benefits from other programs don't automatically qualify you.

A surviving spouse who is 55 or older may be able to keep the deceased spouse's age 65 or older exemption in some cases. A person who is both 65 or older and disabled can get both exemptions in the same year, but not from the same taxing units.

The Tax Code also limits school taxes on the homestead of a person who is 65 or older or disabled. A school district generally can't raise its yearly tax on that homestead above what it charged in the first year the person qualified. The Comptroller lists separate exemptions for disabled veterans and some surviving spouses, too.

Sources: Texas Comptroller of Public Accounts, "Property Tax Exemptions"; Texas Legislature, "TAX CODE CHAPTER 11. TAXABLE PROPERTY AND EXEMPTIONS (Sections 11.13, 11.26, 11.42, 11.43, 11.431)"

What rules does Texas set for home equity loans and cash-out refinances on a homestead?

Texas sets its home equity loan rules in its Constitution, in Article XVI, Section 50. That section protects a homestead from forced sale for most debts and allows only certain loans against it. The notice it requires calls these loans equity loans and warns that the lender may foreclose if you don't repay.

The rules for a home equity loan include written consent from each owner and each owner's spouse. They also limit how much of the home's value can be borrowed against. The loan can close only at the office of the lender, an attorney or a title company.

A home equity loan can't close before the 12th day after the later of your application or the date the lender gives you a required notice. After the loan is made, the owner and any spouse have three days to cancel it without penalty or charge. A new home equity loan on the same home generally can't close until a year after the last one closed.

Texas also limits cash-out refinances. A refinance that adds money beyond the debt being paid off can be secured by the homestead only if it follows the home equity loan rules. The other exception is when all the extra money goes to reasonable refinancing costs or certain other purposes the Constitution lists.

Source: Texas Legislature, "THE TEXAS CONSTITUTION ARTICLE 16. GENERAL PROVISIONS (Section 50)"