Homestead Exemptions: What You Need to Know
Today we’re going to cover what you need to know about the homestead exemption here in Texas. The homestead exemption can save you a lot of money in property taxes on your primary residence. If you haven't heard this term before or aren't clear on how it applies to you, listen up!
We know the word taxes sends everyone running for cover, but this doesn't need to be complicated or scary. While our primary job as realtors is to help families buy or sell homes, we are here for the long haul to make homeownership as smooth as possible. To us, the homestead exemption is a no brainer way to save a lot of money.
Homestead Exemption Qualifiers
We first want to disclose that we are not experts nor property tax experts; we are simply realtors. Each resident can qualify for an exemption in their home's value for school taxes, that amount depends on the city, county, and local government tax laws.
Qualifiers:
Only applies to your primary residence as of January 1st.
If you bought a house last year you are just now eligible.
If you buy a house after January 1st you have to wait till the next calendar year to file.
You need to file it by April 30th of this tax year.
It needs to be your residential home, it cannot be owned by a corporation.
The address must be reflected on your driver's license (you can change this online once you’ve moved).
We are simplifying the terms and each county has a little bit of different details and rules and different processes. There are a couple of different specific exemptions as well, so if you're older than 65, have a disability or you're a veteran, make sure that you're looking out for additional exemptions that apply to you.
Your Home’s Valuation
Let's talk a little bit about how the homestead exemption is valued. It actually lowers your home's valuation in the eyes of your county. In the eyes of the state and appraisal district, the amount that you're being taxed on is lower, because your county assesses your home, assigns an appraisal value, and that is what they determine your taxes off of. Now, that is not the same as the value that your home would be to the open market and it may not even reflect what you most recently sold your home for. The county has their own system that determines the value of the homes and the reason that that's different is, because they can't see inside homes. They're not assessing the quality of the finishes and things that are inside. All that the tax district can see is what your home most recently sold for and what permits you've pulled to upgrade the home.
Typically, your value to the tax appraisal district on your house is going to be less than what you paid for it and what it would sell for on the open market. Normally, we wouldn't want to devalue our home, but in the eyes of the appraisal district, we want to keep that as low as possible since that's what we're getting taxed on. Tax appraisal in the eyes of a tax district is very different from the appraised value that we would use in a property sale when we're going to sell your home on the open market. Now, let’s get into how that appraisal comes to play for your homestead exemption.
Example:
$100,000 tax appraised home and you qualify for $25,000 tax exemption. Now you will only be charged school taxes on $75,000. It’s not $25,000 in savings, but you aren’t paying taxes on that portion.
It’s likely to be a significant amount, which is why we’re telling you about it now and why it’s worth your time! You should be filing for your homestead exemption between January 1st and April 30th, the year after you purchased your home. It’s absolutely free to file your homestead exemption and you file it with your appraisal district for your county on their website. For those of you that are in DFW, go to WhereWeLivePodcast.com to download our free one pager with easy info on how to file in DFW.
PSA: Beware of Scams!
Unfortunately, we all know that there are scams out there, people looking to make a dime everywhere. After you buy a home, you will get some very official looking junk mail and there will be people trying to sell you ways to file for your homestead exemption. You will never have to pay a dime to file for your homestead exemption, so if you get a letter in the mail asking for any amount of money it’s a scam. Do not pay attention to it and do not definitely don't give them your money.
Grace Period
Now, if you found this a year after you've purchased your home or on May 1st of the year after you purchased your home, don't worry! If you forget to file, there actually is a two year grace period. Definitely check into the local laws in your county of how to do that, if they'll credit you back, etc. The good news is once you apply, you do not have to reapply. As long as you fit the basic requirements and you've filed correctly you won't have to do that again until you decide to move.
If you guys buy a home with us, don't worry, we always remind you when it's time to file your homestead. If you're not in Dallas, set yourself a reminder for the calendar year after you buy a home!
Go ahead and save some money!
Congratulations to all of you who bought a home this past year. Go ahead and save some dollars on that property tax money! Filing a homestead exemption is very easy and it's worth your time to save major money on your property taxes. Again, if you're in DFW, don't forget to go to WhereWeLivePodcast.com to download our free one pager on how to file in our local counties. We are here to help no matter what stage of homeownership you're in. If you have additional questions you would like us to answer in the future, drop us a note in the Where We Live Facebook group.
We hope you learned something with us today and helped you save some money! Head on over to WhereWeLivePodcast.com to continue the conversation in our Facebook group, listen to our podcast, and connect with us.
Until next time,
Brianna & Keelie