Congratulations, you bought a house that you'll call your home!
One of the perks of buying a house and using it as your primary residence is that you can file for a tax break called a Homestead Exemption. While there are a few different homestead exemptions, the main one gives you $40,000 off your taxable home value for the year and limits how much your taxes can increase year to year.
That’s not the kind of money you want to miss out on saving! So in this article I’ll explain how that benefit works, how you qualify, and how to make sure you get it.
Let's get into it.
What Are the Benefits?
The homestead exemption is a tax break in two ways.
The first way is by reducing your taxable home value by $40,000.
Edit: This used to be $25,000, but voters raised this amount to $40,000 in May 2022.
The Appraised Value of your house is equal to the market value of the land plus the improvements to the land, minus any “special use exclusions.”
If you have any Value Limitations, that would be deducted from the city’s Appraised Value to reach your Net Appraised Value. This Net Appraised Value is what you will be taxed on so you want this number to be as low as possible. The lower it is, the lower your taxes will be.
Pro Tip: Texas is a non-disclosure state so you should not tell the city how much you paid for your house. You might get a letter in the mail asking you to tell them, but you don’t have to and it’s in your best interest not to.
If the county appraiser evaluates your assessed value as $400,000 and if your tax rate is 2.17% (this is the tax rate where I live in East Austin), this means your property taxes would be $8,680 per year, which is $723.33 per month.
However, an approved homestead exemption may reduce your taxable amount by $40,000. In sticking with the previous example, instead of being taxed on $400,000, you would be taxed on $360,000. This means your annual property taxes would be $7,812 per year, which is $651 per month. It's only a $72.33 difference, which may sound small, but you can take yourself to a nice dinner with that.
The second and much more significant benefit of receiving this homestead exemption is the cap on how much your home's appraised value can increase. If your house is designated as your homestead, then your assessed value cannot increase more than 10% from one year to the next.
According to the Comptroller's page about valuing property:
In a market that's appreciating as aggressively as the Austin market, this is a huge benefit that will save thousands of dollars year to year.
How Do You Qualify?
It's easy to qualify for the homestead exemption:
Own & Live in the Property as Your Primary Residence: You must own and reside in the property as your primary residence as of January 1 of the year you are filing. For example, if you're filing a homestead exemption for 2022, you would have needed to be living in your house as your primary residence on January 1, 2022. If you bought and moved into your home on January 2, 2022 or after, you will need to wait until January 1, 2023 to reap the benefits of a homestead exemption for 2023. In order for your home to be considered a primary residence, the home must be owned by an individual (not by a business, LLC, etc) and the home must be used as your principal residence. It can also be up to 20 acres.
Have a Valid TX ID: You need a Texas driver's license or Texas-issued identification certificate. The address on this must match the address for which you're getting the homestead exemption. If your ID has an old address, update it with your new one.
File on Time: File your homestead exemption any time from January 1 to April 30 of the current year. If you're late, you can file up to 2 years after the delinquency date, which is usually February 1.
How Do You File It?
The county doesn't make it super clear. Since the majority of my clients are filing for this in Travis County, that's what I'll outline below.
Step 1: Ensure you fit all 3 criteria above
This must be your primary residence that you live in as of January 1 of the current year. In other words, if this is your vacation home or investment property, you cannot apply for this. If you bought and moved into your house in March 2022, even if it's your primary, you cannot file for this exemption until January 2023.
You will also need to submit a copy of your ID. If you don't have a Texas ID with your new address on it, update your ID before submitting your application. If the address on the ID and the address of your house don't match, you will not be approved.
Step 2: Look up your home in the public county records
You can find the database here. Use the dropdown bar on the left of the screen to adjust the search field. I usually find that it's easiest to use the "Compound Text Search" option and search for your last name.
From there, select the correct property. This page will have all of your information to help you fill out your application.
Step 3: Fill out the online form
Travis County luckily has an online portal, which can be found here. Register for an account and be sure to save your credentials because you will use this same portal to track your application status.
Here are a few tips for filling out the form:
Part 1: Exemptions Requested
If you are changing your homestead exemption from one property to another, you'll indicate that here. If this is the case, say yes to the questions under the "Prior Residence" section and be sure to plug in the proper address of your previous home.
Part 2: Applicant Information
If you're married, be sure to add your spouse's information. Keep in mind that you will both need to submit pictures of your IDs and the address on both IDs must match the address of the property in question. For document waivers, the answer to these questions are likely "No".
Part 3: Parcel Search
This pulls your home from the county records so fill out your street number and street name (ex: 123 Main St), your zip code, and your last name. Click "Search Land Records" and select your property.
Part 4: Homestead Information
- If you're unsure of when you closed on the property, contact your real estate agent.
- For the question regarding whether the applicant is identified on the deed or other recorded instrument, check your public information from Step 2, when you looked up your home in the public county records. Scroll to the "Deed History" section at the bottom. If you see your name in the Grantee/Buyer column, then the answer to this question is "Yes". The form in JustAppraised will ask for the deed's instrument number, which is also in the "Deed History" section of the public county records.
- If the property is an heir property, you should be aware of this. If you're not, the answer to this is likely "No." See below for further details, which are pulled directly from the 50-114 form.
- If your home is a mobile/manufactured home, you will need to provide further information. See below for further details, which are pulled directly from the 50-114 form.
- If any portion of the subject property is income producing, you will need to provide a percentage of the property that's income producing. For example, if you own a duplex and rent out the other side, you would write in 50%. This can get pretty niche so if you're unsure, call the county.
- For the final question in this part, you can find the number of acres of your plat of land under the "Land" section from Step 2 when you looked up your home in the public county records.
Part 5: Documentation - File Uploads
This is where you will upload the IDs for each applicant listed under Part 2 of the form. If the subject property is a manufactured home, as indicated in Part 4, then you will also upload your Affidavit Establishing Ownership of Interest in the property, the sales purchase agreement, and the Texas Department of Housing and Community Affairs statement of ownership. Then you will validate the documents, which is an automated process.
If you wish, you can fill out the Application for Residential Homestead Exemption, print it out, and mail it to the Travis County office's mailing address, which is P.O. BOX 149012, Austin, TX 78714-9012.
Step 4: Track Your Approval
If you filed online then you will receive emails from JustAppraised. If you mailed in your application, monitor your mail for updates from the county.
And That's All, Folks!
This whole process usually only takes 5-10 minutes on your end and can save you thousands of dollars over time. That's great ROI if you ask me, so get to it!
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