Homestead exemptions offer many benefits to qualified homeowners
Texas has great homestead exemption options for homeowners. Benefits include reducing the portion of the value that is taxed and limiting the annual increase in property taxes.
Using an antiquated process to apply homestead exemptions, the exemption is a direct deduction off market value, before calculating property taxes based on value.
Appraisal district’s practices and policy preventing fraud have reduced the number of homestead exemptions. Bexar County has the highest level of homeowners who do not have a homestead exemption for which they appear to qualify compared to the counties for Houston, Dallas and Austin.
The process for appropriately determining a homestead exemption is that the home address and the mailing address are the same. Brazoria and Collin Counties have the lowest number of homes without an apparently deserved homestead exemption.
The portion of eligible homes without a homestead exemption is less than 0.5 percent in both, compared to 10.7 percent for Harris County.
Homestead requirements
Texas homestead requirements are simple. You must own the house and it must be your primary residence on Jan. 1 of the year in question.
There is no cost to apply for a homestead exemption and you can do it online or even use an app in certain counties, including Harris. There is no fee and you do not need to pay a third party to obtain your homestead exemption. Complete the form and include a copy of your driver’s license or state-issued identification to confirm the address.
Types of Texas homestead exemptions
Texas homestead exemptions are strong and tend to reduce the regressive nature of property taxes for the less affluent. In addition to the typical homestead exemption, there are homestead exemptions for: 1) over-65, 2) disabled, 3) 100 percent disabled veterans injured in action, and a variety of less substantial exemptions.
The benefits of a homestead exemption are difficult to quantify since they vary from one tax entity to another. There are over 500 tax entities just in Harris County. Each has some discretion on homestead exemptions.
The benefits of the over-65 homestead exemption are two-fold. First, it freezes the amount of school property taxes you are paying. Capital replacements, including roofs, plumbing, electric and air conditioners would not increase the property taxes.
Second, much larger homestead exemptions are available from the city of Houston and Harris County. Graduating from the basic homestead exemption to the over-65 exemption increases property taxes from $64,000 to $207,579 for both Harris County and the city of Houston.
With city and county exemptions, about half with an over-65 or disability exemption pay zero taxes to the city or county. The median home price in January 2017 was $210,000, just slightly over the amount of exemption.
Public policy issues
There are interesting public policy issues relating to homestead exemptions. First, why can’t we make it easier to obtain a legitimate homestead exemption?
The hurdle to obtain a homestead exemption is low, but could it be lower? Research by Texas property tax firm O’Connor indicates 8.8 percent of eligible homeowners do not have a homestead exemption.
Is there a reasonable process in 2017 given the advances with computers and data to ensure that property owners have a homestead exemption for which they qualify?
One option would be for appraisal districts to send an annual homestead application with instructions and an estimate of savings. The communication could also attempt to address the concerns of immigrants.
Secondly, the aging baby boomer population would seem to indicate a looming crisis for cities and counties if they have generous homestead exemptions for those over 65.
Houston and Dallas both face budget crises related to pensions. Do they also face revenue problems due to exemptions? The answer is, “not really.”
The portion of the Texas population over 65 is expected to increase from seven percent in 2014 to 11 percent in 2050. While this is a large increase in terms of total people and the portion of the population, it still leaves 89 percent of homeowners paying based on a much lower exemption. Their tax revenue will also include houses with an over-65 exemption, but with a higher value.
No cost, substantial savings
Property tax relief for Texas homeowners starts with obtaining the appropriate homestead exemption. If you are not sure if you qualify, call the county appraisal district. Citizenship is not a requirement.
Appraisal district processing of homestead exemptions is a simple matter of confirming ownership and a state identity.
Texas homeowners should obtain a homestead exemption for their primary residence.
There is no cost and the savings are substantial. Also, homeowners must have a homestead exemption to get the benefit of the 10 percent cap on future increases in value.