Homestead Exemption Law: What Has Changed and What it Means

By: Elizabeth Garner & Nicholas Johansen

Texas has once again updated its Homestead Exemption law, but what does this mean for current homeowners and first-time buyers? 

What is the Homestead Exemption?

The Homestead Exemption is essentially a tax break for your property. The school district you live in provides the exemption of up to $25,000 for the owner-occupied residents.

How does the Homestead Exemption work?

You may save thousands of dollars a year by excluding a portion of your home's worth from taxation. Let's say you own a home that appraised for $350,000, and you are eligible for a $25,000 homestead exemption. As a result, you'll only be paying taxes on the appraised value minus the exemption, in this case, $325,000.

What Homestead Exemptions are there?

As it states on the Texas Comptroller's website:

• "School taxes: All residence homestead owners are allowed a $25,000 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 a $3,000 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 a $10,000 homestead exemption for school taxes, in addition to the $25,000 exemption for all homeowners. If the owner qualifies for both the $10,000 exemption for age 65 or older homeowners and the $10,000 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 Jul. 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 of at least $3,000 for taxpayers age 65 or older and/or disabled."

Requirements to qualify for the Homestead Exemption:

• Living individuals (not a corporation or other business entity) must own a separate structure, condominium, or manufactured home located on owned or leased land.
• The home must be his or her principal residence on Jan. 1 of the tax year.
• Driver's License must match the property's address that you are claiming the homestead exemption on.

Changes to Homestead Exemption

The recent change in the Homestead Exemption Law will make it easier than ever to apply.

• You will no longer need to wait until January. Homeowners can now file for homestead exemption after they leave the closing table.

If you purchased a home in May and the previous owner already filed for Homestead Exemption, don't worry, you will be able to file in January, and you will still see the savings reflected on your taxes for the year you closed on your home. 

• Homestead Exemption Laws are ever-changing; there will be a ballot proposal on May 9th, 2022, to give voters an opportunity to raise the exemption from $25,000 to $40,000.

How to File Home Exemption

Filing for Homestead Exemptions is so much easier than it used to be. With most counties offering online applications. You can file as early as Jan. 1 and no later than Apr. 30 of the tax year. Keep in mind that you will file your homestead exemption with the county your home is located. If your county doesn't have an online application, print and mail your homestead exemption forms to the address their website directs you to. 

• If you purchased your home outside of the standard filing timeline (Jan 1 - April 30), you would be able to file immediately after closing on your home as per the changes to the law.
• If you co-own an eligible property with another person(s) -- who is not your spouse -- you can file for Homestead Exemption for the portion of the home you own. For example, if you own 50% of the property, you could qualify for half the exemption, $12,500. 

Protect yourself

Remember there is NO cost to file for Homestead Exemption, please keep an eye out for third-party emails or mailers requesting filing payment. These are SPAM and are not real. 

Click here for general information on homestead exemptions. Find your county here.