New 5-Year Renewal Rule on Texas Homestead Exemptions

Under new regulations in property codes, Texas homeowners requirements state that homeowners may need to renew their homestead exemption every five years, a detail that underscores the importance of staying informed on homestead policies to maintain these tax exemptions.

This marks a change from when homeowners were only required to do this one time, which would remain in effect until the property was sold.

Now, the amendment requires periodic reviews by appraisal districts to verify continued eligibility for exemptions, including the homestead exemption.

Not all homeowners will be affected, but if you receive a letter from your appraisal district, DO NOT DISCARD OR IGNORE IT!

If you fail to provide the required information for your homestead exemption when it is requested, you could lose out on tons of savings and a potential catastrophic increase in your property taxes.

What is a Homestead Exemption?

A homestead exemption is a tax break intended to lower the taxable value of a property, offering significant savings on property taxes for homeowners. In Texas, this tax exemption allows homeowners to potentially deduct up to $100,000 from their property’s assessed value, which can vary by county, making the Texas homestead exemption a key financial advantage for eligible residents.

Legislative updates effective January 1, 2022 also allowed new homeowners in Texas to apply for their homestead exemption in the same tax year they acquire their home, enhancing its appeal and broadening its accessibility.

In this article, M&D Real Estate will delve into understanding homestead exemptions, recent legislative changes, application requirements, its impact on property taxes, and the necessary actions for those required to reapply, equipping you with the knowledge to navigate these regulations successfully and not miss out on your homestead exemption.

Understanding Homestead Exemptions

Understanding the intricacies of homestead exemptions in Texas is essential for homeowners seeking to lower their property tax bills. Here’s a breakdown of the key points:

The General Residence Homestead Exemption offers homeowners a $100,000 exemption for school taxes, reducing the home’s assessed value for school tax purposes. Additionally, county taxes allow for a $3,000 exemption for special taxes such as those for farm-to-market roads or flood control.

Additional exemptions are available for certain groups:

Elderly (65 or older) and disabled homeowners qualify for an extra $10,000 exemption for school taxes, in addition to the general residence exemption.
Veterans with a 100% disability rating are entirely exempt from property taxes.
Optional exemptions may be provided by any taxing unit, allowing for up to 20% of a home’s value, but not less than $5,000.

If the property owner acquires the property after Jan. 1, they may receive the general residence homestead exemption for the applicable portion of the tax year immediately on qualification of the exemption if the previous owner did not receive the same exemption for the tax year.

Once granted, the exemption generally remains in place without needing annual renewal, except in specific circumstances where renewal may be required every five years to ensure ongoing eligibility. If your tax appraisal district reaches out, be sure to answer and re-apply for your homestead exemption/offer proof.

2025 Update: Legislation Passed Senate to Increase Homestead Exemption

The Texas Senate just passed another two bills aimed at lower your property taxes.

The two bills, Senate Bill 4 and its companion Senate Joint Resolution 2, would set the state’s homestead exemption on school district taxes at $140,000 of value, which is the amount exempted from being taxed to pay for public schools. The current exemption sits at $100,000 since the 2023 cuts. For seniors ages 65+, it would be a proposed $150,000 exemption.

If the two companion bills pass in the House and then voters approve the constitutional amendment proposal in the November 2025 elections, the new Homestead Exemption of $140,000 would be codified in the Texas constitution.

The bills have received support from both sides of the aisle and passed unanimously by both Republican and Democratic senators.

The Homestead Exemption would apply retroactively to tax bills for 2025.

Stay tuned. The two bills now head to the House of Representatives for their vote.

Other Recent Legislative Changes

In a landmark move in 2023, Texas Governor Greg Abbott enacted legislation set to deliver the largest property tax cut in the state’s history, totaling $18 billion. This monumental decision underscored a significant shift in Texas’s approach to property tax relief, aiming to alleviate the financial burden on homeowners and small business owners alike.

Key aspects of the recent legislative changes included:

Increased Homestead Exemption: In Texas, there is a standard homestead exemption that is offered by public school districts for primary residences. Before November 2023, this amount was $40,000; however, a constitutional amendment more than doubled the amount to $100,000. This exemption reduces the taxable value of your property.
Protection for Senior Homeowners: A pivotal goal of the new legislation was to shield senior homeowners from the risk of being priced out of their homes, ensuring they can enjoy their retirement years without the looming threat of escalating property taxes.
Enhanced Relief for Small Businesses: The legislation doubled the small business exemption for the Franchise Tax and introduced measures to protect these entities from excessive appraisal increases. There is now a 20% cap on appraisal increases for non-homestead properties valued under $5 million, aiming to foster a more supportive economic environment for Texas’s small businesses.

These legislative adjustments ensured significant tax savings for Texas homeowners and small businesses but also marked a proactive step towards ensuring the long-term affordability and economic stability of the state.

How to Apply for a Homestead Exemption

To apply for a homestead exemption in Texas, homeowners should follow a series of steps. Firstly, they need to obtain the Residence Homestead Exemption Application Form 50-114 from the Texas Comptroller of Public Accounts, Property Tax Assistance Division website or the local appraisal district office. It is crucial to ensure that the form is filled out accurately, providing all necessary information.

Secondly, homeowners are required to gather the necessary documentation, including a copy of their driver’s license or state-issued identification card, ensuring that the address matches the property for which the exemption is being applied. Additionally, they need to provide proof of ownership, such as a deed or sales purchase agreement, and any special documentation if applicable, such as proof of disability for those applying due to disability.

Lastly, the completed application and supporting documents should be filed with the appraisal district office in the county where the property is located, not with the Texas Comptroller of Public Accounts.

The deadline for submission is typically between January 1 and April 30 of the tax year for which the exemption is requested. However, late applications may be accepted under certain conditions, such as for disabled persons or those over 65, and up to five years for disabled veterans.

It’s important to remember that once granted, a homestead exemption does not need to be reapplied for in subsequent tax years unless specifically required, such as the new mandate for Texas homeowners to renew their exemption every five years, if requested.

Impact on Property Taxes

The homestead exemption in Texas plays a pivotal role in managing property taxes for homeowners, providing significant financial relief in several ways:

Limitation on Taxable Value Increases: The homestead exemption effectively limits the annual increase of a homeowner’s property tax bill. Specifically, the taxable value of a property can only rise by a maximum of 10% compared to the previous year’s appraised value, excluding any new improvements to the property. This cap is instrumental in preventing sudden spikes in property taxes, ensuring more predictable and manageable expenses for homeowners.
Timing of Homestead Limitation Effect: It’s important to note that this limitation does not take effect immediately upon qualifying for the exemption. Instead, the homestead limitation comes into force on January 1 of the year following the property’s qualification for the exemption. This delay underscores the importance of timely application for the exemption, especially for new homeowners or those who have recently become eligible.
Saving Potential and Tax Deferral: The homestead exemption can lead to substantial savings on property taxes, with the amount saved depending on the property’s value and applicable tax rates. For homeowners aged 65 or over, or those who are disabled, there is an additional benefit: the ability to defer (postpone) paying delinquent property taxes on the homestead as long as they own and reside in it. To take advantage of this deferral, homeowners must file a tax deferral affidavit with their local appraisal district.

What to Do if You're Required to Reapply

For Texas homeowners required to reapply for their homestead exemption, possibly every five years as part of the new mandate, the process is straightforward but demands attention to detail and adherence to deadlines. Here’s a step-by-step guide to ensure seamless reapplication:

Application Form: Obtain and complete the Residence Homestead Exemption Application Form 50-114. This form is essential for reapplying and is available through the appraisal district in the county where the property is located.
Submission Deadline: The standard deadline for submission is April 30 of the year for which the exemption is requested. However, there are provisions for late applications under certain conditions:

Up to two years late for age 65 or older, or disabled persons.
Up to 5 years late for disabled veterans (not a surviving spouse).
Up to two years late for a surviving spouse of a disabled veteran.

Required Documentation: A valid driver’s license or state-issued personal identification certificate, with the address matching the property. For heir property owners and manufactured homeowners, specific additional documents such as Form 114-A or a statement of ownership are necessary.

Following these steps diligently ensures homeowners can maintain their valuable homestead exemption, continuing to benefit from tax exemptions crucial for financial relief.

Understanding the Texas Homestead Exemption

Throughout this article, we have dived deep into the workings of the Texas homestead exemption, illuminating its benefits for homeowners and the imperative need for periodic renewal, now required every five years, to ensure ongoing eligibility and tax relief.

Legislative changes being discussed in the House of Representatives soon would provide substantial property tax cuts again to Texas Homeowners, increasing the Homestead Exemption to $140,000, underscoring the importance of understanding and maintaining these exemptions. By staying informed and adhering to the renewal requirements, Texas homeowners can continue to leverage these financial advantages, safeguarding their economic stability and the value of their most cherished investment.

As homeowners navigate these regulations and seek to maximize their benefits under the Texas homestead exemption, it becomes crucial to have reliable, expert advice at their disposal.

Contact an M&D agent today for their expert advice on homestead exemptions and anything else related to buying or selling a home. Our agents can also help you with a complimentary CMA (home value estimate) to help you protest your property tax bill if you feel it is too high.

Through diligent application and renewal processes, alongside professional guidance, homeowners can ensure they are optimally positioned to enjoy the full spectrum of benefits the Texas homestead exemption has to offer, securing both their property and financial future.