What is a Homestead Cap? – Texas Property Tax Reductions

If you’re considering buying a house in the Lone Star State, it’s essential to understand the homestead cap and how it affects property taxes. This limit protects homeowners from getting hit with big tax hikes on their homes once they move in.

The homestead cap is a limit used by Texas counties to determine the price at which a homestead will be taxed. This ensures that your property taxes don’t increase too much after you’ve bought a primary residence. Let’s dive deeper into what a homestead cap is and how it can affect your property tax bill.

What Is A Homestead Exemption?

To apply for a homestead exemption in Texas, you must either own or lease and occupy the land as your primary residence. A “primary residence” means precisely what it sounds like: it’s where you live most of the time — not necessarily where you sleep at night (but usually). Applicants must also prove that they do not claim an exemption on another residence homestead in or outside Texas.

Now that we’ve established who can get one: how do I apply for my homestead exemption? The good news is, it’s pretty easy! Just fill out form TAC-25A with your county appraisal district office by March 1st each year and submit any supporting documentation requested, such as copies of monthly mortgage statements/proof that payments have been made consistently throughout the past 12 months (if applicable).

What Is A Homestead Exemption Cap?

Property taxes are determined by multiplying the property’s taxable value by the tax rate. The homestead cap determines how much your property’s taxable value can go up in a given year without exceeding this limit. In Harris County, increases in the total assessed value are capped at 10% yearly if the property is under the homestead exemption. This excludes improvements added by the property owner.

The homeowner’s property tax is based on the county appraisal district’s appraised home value. Technically, a Texas homestead’s assessed value is limited to the lesser of either its market value or the sum of the market value of any new improvements and 110% of the appraised value of the preceding year. The 10% increase is cumulative. Therefore, the maximum increase is 10% times the number of years since the property was last appraised.

Other Exemptions

Age 65 or older or disabled persons
- All homeowners aged 65 years or older may qualify for an exemption
If you’re a person with a disability, you may be able to get relief from some portion of your property taxes
- Disabled veterans and surviving spouses of disabled veterans/first responders killed in the line of duty may also qualify for exemptions

You can determine whether you qualify for different property tax exemptions by reviewing your state and local websites, calling the local tax collector’s office, or checking with a tax professional.

Conclusion

Although owning a home has many financial benefits, paying taxes is never fun. In Harris County, residential home values have surged by 15%-30%. Because property taxes are based on the assessed value of your home multiplied by your area’s tax rate, this unprecedented increase coupled with an already high county tax rate is astronomical. Harris county’s tax rate is 2.03%, double the national average. Due to this surge, knowing about all the exemptions and caps available to you is smart.

You should know that there are limits on how much your property taxes can go up when you buy a house in Texas. The homestead cap ensures that your property taxes don’t increase too much after you’ve bought a house, so long as its value doesn’t go up exorbitantly. It may seem like just another government regulation, but it helps ensure the tax code is fair for everyone involved!

Texas Property Tax Reductions Can Help You Save Big

Texas Property Tax Reductions (TXPTR) can help you reduce your tax burden. We have a proven track record of success. We have successfully reduced property tax values for over 97.6% of our clients, with an average reduction of $42,302 and an average tax savings of over $1,184.

Which Property Tax Exemptions Are Available In Texas?

A property tax is a tax paid by a homeowner based on the assessed value of their property. In the U.S., these tax rates are set forth by the state and local counties. Property taxes fund school districts, community amenities, and other local expenses and projects. Property taxes can vary widely between states. Unfortunately, according to data by WalletHub, Texas has one of the higher tax rates. Although we’re not New Jersey (2.49%), we still make the list for the highest property tax rates at 1.8%. Luckily property tax exemptions can lower that burden for many homeowners. Let’s look at some of the most common exemptions beyond the homestead exemption.

Texas Residents Have An Array Of Exemptions Available

If you’re a Texas homeowner, you’re among the luckiest in the country. Not only do you get to live in one of the most beautiful states on earth, but you also have access to some excellent property tax exemptions.

Disabled People And Their Spouses Have Special Exemptions

Disabled people and their spouses have special exemptions. The disabled person or spouse can get a homestead exemption on their primary residence if the disability is certified by a doctor to be 30% or more, or 100% permanent and total.

If you qualify, you may also be eligible for an exemption on the home where your spouse resides (or lives). This exemption amount depends on how much of an income is received from Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI).

Seniors Over 65 Can Get A Lower Exemption If They Meet Certain Requirements

If you are 65 or older, you might be eligible for a lower property tax exemption if you meet specific requirements. This exemption is called the senior citizen homestead exemption and is available on the first $25,000 of your home’s value.

To qualify:

You must have lived in your home for at least six months during the year before applying for this exemption (if buying a new house)

Your income cannot exceed $26,250 annually (if buying a new house)

Widows And Widowers Can Get Special Exemptions If They Meet Certain Requirements

If you are a widow or widower of a first responder who died in the line of duty, you may be eligible for property tax exemptions on your home. To qualify, you must have been married to the first responder at the time of their death and meet age requirements (55 years old or older).

Disabled Veterans And Their Surviving Spouses Can Get A Tax Exemption On All Or Part Of The Value Of Their Home.

Suppose you are a disabled veteran or the surviving spouse of a disabled veteran, and the veteran was honorably discharged. In that case, you may be eligible for an exemption on all or part of the value of your home. The exemption applies to properties owned by eligible veterans who became disabled before January 1, 1997, as well as surviving spouses of those veterans.

To qualify for this exemption:

You must have been a resident of Texas at the time you were honorably discharged from active service in the U.S. armed forces, including any branch of service that became part of the U.S. armed forces after World War II (September 2nd, 1945).

Your disability must have been determined by the Veterans Administration to be service-connected and permanent in nature (total disability).

Surviving spouses of first responders killed in the line of duty are eligible for an exemption from taxes on all or part of their homesteads and school property taxes. The surviving spouse must have been married to the first responder for at least one year before their death, and the property must be the principal residence of both spouses. In addition, no one other than you can claim any ownership interest in your home unless they are your child or grandchild who lives with you.

The amount of savings depends on how much assessment value is removed from your tax bill each year by this exemption. For example, if a home has a market value of $100k but only has an assessed value of $60k because it’s been grandfathered into an old classification system—and thus gets hit with higher rates than newer homes nearby—the surviving spouse would save roughly $600 per year (or more than $6k over five years).

Most Texans Qualify For At Least Some Type Of Property Tax Exemption

Most Texans qualify for at least some type of property tax exemption. Nearly three-fourths of all Texas homeowners claim an exemption yearly, and that percentage keeps growing.

The most common exemptions are based on income, age, or disability status. Other exemptions include those available to senior citizens, disabled veterans, and their spouses, who receive a 100 percent exemption on the value of their home or all or part of the taxes due. Some counties offer additional exemptions based on your income level, such as school district taxes that can be waived if you are over 65 years old and meet specific income requirements; these vary by county, so contact us for details about what’s available in each area.