Property tax exemptions reduce the amount of taxes that homeowners are required to pay. One exemption is called a homestead exemption. A homestead exemption reduces the taxable portion of your home’s assessed value, so you pay less in property taxes. For example, a home that is worth $400,000 with an exemption of $40,000 would be taxed at a value of $360,000.
The homestead exemption may be a flat-dollar amount, or it may be percentage-based, or a combination of the two depending on your city and state.
There are several types of homestead exemptions, but for this blog post, we’ll focus primarily on the general homestead exemption. Learn how this exemption can help you save on your property taxes.
Who qualifies for a homestead exemption?
In Texas, any individual who owns a residential property can qualify for a general homestead exemption. This exemption does not apply to commercial properties or business entities.
In addition, the exemption can only apply to the primary residence. You can’t use it on another home that you own in Texas or another state.
How much do you save on taxes with a homestead exemption?
Let’s use a home in Collin County valued at $700,000 with a tax rate of 2.5% as an example. Without a homestead exemption, this homeowner could expect to pay about $17,500 in property taxes for the year.
If the homeowner qualifies for an exemption, their assessed value would be $660,000. Using the same tax rate, they would owe $16,500 in property taxes. That’s a savings of $1,000.
Remember that property taxes are based on your assessed value and tax rates in your county, and property taxes will vary each year. Use your county’s tax rates and your state’s homestead exemption to calculate what you could save in property taxes.
Does a homestead exemption lower your mortgage payment?
An exemption could lower your mortgage payment if your property tax payments come from an escrow account. The lender will analyze your escrow account to determine if you are paying too much or not enough.
If you are not escrowing your taxes, you should not expect to see a reduction in your monthly mortgage payments, even if you have an exemption.
How to apply for a homestead exemption in Texas
Filing for a homestead exemption is free, and you only have to apply once. Here are the steps to apply:
- Visit the website of your county’s appraisal district and look for exemption information.
- Prepare required documentation with your application. You’ll need a copy of your Texas driver’s license. The address on your license should match the address on the homestead for which you are requesting an exemption.
- Complete all required fields and questions in the application, Form 50-114.
- File the application with your appraisal district online or through the mail.
The deadline to file your homestead exemption is April 30 of the tax year for which you are applying, although you can file a late application up to two years later.
Take advantage of the homestead exemption to lower your property taxes. Property tax consultants at NTPTS can help you determine if you qualify for a homestead exemption, and can also discuss other exemptions that you may qualify for.
In addition, our property tax reduction services can also help you save on your property taxes.