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Have You Filed Your Homestead Exemption?

Have You Filed Your Homestead Exemption Yet?

Homestead Exemptions save you money on property taxes and provide protections. Have you filed yet?

Updated February 16, 2024.

If you currently own a home or are planning to buy one, it’s important that you understand the benefits of filing for your homestead exemption. Under Texas law, homeowners who file for homestead exemption are offered protections as well as tax benefits on their primary residences. So what exactly defines a homestead? A homestead can be a single family home, separate structure, condominium, or a mobile home located on leased land, as long as you own it AND occupy it as your primary residence. It can include up to 20 acres if the land is used as your yard.

What this is going to do is basically three things:

Protection for your Home

First, it’s going to provide protection from any creditor from forcing the sale of your homestead to satisfy non-payment of a debt. Now there are certain exceptions to this such as your mortgage holder, a taxing authority, or the holder of a note created for a home improvement loan.

Saving Money on Property Taxes

Secondly, your homestead exemption provides for a reduction in the taxable value of your home; thereby reducing your total property tax liability. These valuation deductions can show up on any number of the individual taxing entities to which your property belongs, but the biggest benefit will show up on your school district taxes.

Proposition 4, passed in 2023, provided two significant changes for Texas homeowners. First, it raised the homestead exemption for school taxes from $40,000 to $100,000 (meaning your $400,000 home will be taxed as if it were worth $300,000). Secondly, it reduced the tax rate that school districts use to calculate property taxes by 10.7 cents. Together these changes will save the average homeowner over $1,000 annually.

As an example, for a typical home in Katy ISD, your school tax savings might look like this:

Before Prop 4After Prop 4
CAD Appraised Value$400,000$400,000
Homestead Deduction$40,000$100,000
ISD Tax Rate1.30%1.12%
ISD Tax Value$4,680.00$3,360.00
* Rate based on the 2022-2023 Katy ISD Total Tax Rate

Keep in mind, this simple example represents only the school district portion of your tax bill and there will be other entities that impose a tax rate on your home. You SHOULD however investigate whether additional exemptions are available from the other taxing entities on your property. The City of Katy, for example, allows for a 20% exemption of the total home value if the home falls under its taxing jurisdiction. There are also additional exemptions that some homeowners may qualify for as well – Over 65, Disability, Agricultural, etc.

Annual Valuation Cap

Last, your homestead exemption caps the annual increase on taxable value that an appraisal district can make on your home at 10% per year. So in short, the taxable value of your home can be no more than the preceding year’s appraised value + 10% even if the market value of your home exceeds that cap. It’s important to recognize the difference between market value and taxable value. Even though your taxable value is capped at 10% each year, the increase is based on the market value for the previous year, NOT the previous year’s taxable value. This is why it’s important to fight your assessment each year.

So what else do I need to know?

Here’s the great thing: you only have to file for your homestead exemption one time and it’ll carry over year after year. But filing is NOT automatic. Effective January 1, 2022, new home buyer’s may apply for the general residence homestead exemptions in the year they purchase the property for the applicable portion of that tax year. You no longer have to wait until January 1st of the following year.

Each county will have their own application, so be sure to use the correct form for your home. We’ve linked to the applications from the 6 Houston-area appraisal districts below.

Now one more thing: if you get letters in the mail telling you that they’ll file your homestead exemption for a fee, trash it. Filing your homestead application is free. And those letters, despite looking a lot like official documents, are from companies trying to make a buck off the backs of unsuspecting new homeowners. Typically, these letters will show up in your mailbox soon after you purchase your property.

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