When I bought my first home, I was told about the Texas Homestead Exemption and that it was a good thing. But nobody ever fully explained to me what it was. The question of what the homestead exemption is frequently pops up as I work with first-time buyers as a Realtor. So to help all the first-time homebuyers out there and possibly even some who are existing homeowners, here it is, the homestead exemption explained.
What is the Texas Homestead Exemption?
A homestead is the house and land of a homeowner of which the head of household declares in writing to be the principal residence. It can be a separate structure, condominium or a manufactured home located on owned or leased land and can include up to 20 acres. So long as the homeowner owns the land, it can be used as a yard or for another purpose related to the residential use of the homestead.
What is the homestead exemption?
Homestead laws were developed to grant a surviving spouse, minor children, and/or unmarried children of a deceased homeowner the right of occupancy, to afford a reduction on property tax, and also to protect a home from creditors. Generally, when people reference the term homestead exemption, they are referring to the tax reduction/exemption or the exemption from debts or discharge from debt payments. Homestead laws do vary from state to state. I will only concentrate on the tax reduction/exemption in this blog.
What is the benefit?
In Texas, the homestead exemption allows a deduction equal to 20% of the house value on a principal residence. Basically, the exemption removes part of your homea��s value from being taxed, ultimately lowering your property taxes. If your home were appraised for $200,000, you would qualify for a $40,000 exemption. You would pay taxes on the homes as if it was worth $160,000. The benefit of the homestead exemption is a significant amount of savings.
There you have it. The Texas Homestead Exemption explained. The application for Residential Texas Homestead Exemption is fairly simple and a whopping one page long. Instructions on how to fill out the form are on the reverse side along with the qualifications and limitations. You can find the application on your county appraisal districta��s website.