Texas Property Tax Exemptions | Texas Homestead Exemptions

Looking for a better understanding of Texas Property Tax Exemptions | Texas Homestead Exemptions?  Cory Macdonald, Associate Attorney at Davis & Wilkerson P.C. has provided us with a special overview of the topic below.  For further questions on the subject feel free to contact Cory Macdonald directly at cmacdonald@dwlaw.com.  For help with your Austin home search contact Austin REALTOR® Brian Talley of Regent Property Group at info@regentpg.com.

According to the Texas Tax Code  (Code) , the definition of "Residence homestead" means a structure (including a mobile home) or a separately secured and occupied portion of a structure (together with the land, not to exceed 20 acres, and improvements used in the residential occupancy of the structure, if the structure and the land and improvements have identical ownership) that:
(A) is owned by one or more individuals, either directly or through a beneficial interest in a qualifying trust;
(B) is designed or adapted for human residence;
(C) is used as a residence; and
(D) is occupied as his principal residence by an owner or, for property owned through a beneficial interest in a qualifying trust, by a trustor of the trust who qualifies for the exemption.
   
Texas property taxes are levied ad-valorem, meaning according to value.  Each of Texas’ 253 county appraisal districts uses its own appraisal methods to determine the value of the residential property in its jurisdiction. The appraisal district submits these property values to the various taxing jurisdictions (i.e. school district, utility district, etc.) within the district’s boundaries.  The assorted local taxing jurisdictions subtract state mandated and any approved local tax exemptions from the appraised value to determine the Taxable Value of the property.  Then, the local jurisdictions apply their tax rate to the Taxable Value of the property to determine the amount owed to each of them.  The total tax bill on a piece of property is the sum of the amounts owed to each taxing jurisdiction in which the property is located. 
 
Approximately 3,500 jurisdictions in Texas have authority to tax property, and each governing body has considerable leeway to determine the tax rate that it will levy.  In many locations, special districts have been created to carry out specific government functions. Over 1,000 such districts exist in Texas today. They include: municipal utility districts, drainage districts, water districts, road districts, and fire districts, just to name a few.  Property taxes comprise a very large share of total taxes in Texas. Therefore, it is important that the values on which property taxes are based be determined in an accurate and professional manner. Equitable appraisal means that all property throughout the state is treated uniformly. This is especially difficult considering that property in Texas is appraised not by one central unit, but by 253 separate appraisal districts.
 
Everyone is entitled to $15,000 off appraised value of their “residence homestead” for purposes of school district taxation under 11.13(b) of the Code.  There are no other mandatory across the board homestead discounts for city, county or school taxes.  However, 11.13(n) provides for an optional discount that can be created by any taxing unit (not just school district) which apply to all residence homestead owners in that taxing unit, whether it is a city, utility district, or county.  This additional amount, if enacted, must be at least $5,000, but can be up to 20% of the appraised value of a home.   In considering a move in the Central Texas area, it is worth reviewing which taxing entities you will be under, and whether or not they offer additional discounts under this section of the Code. 
 
Along with the above discounts, under 11.13(c) of the Code, those 65 and over are entitled to a mandatory exemption of $10,000 off the appraised value of their residence homestead for school district taxation.  In addition, under 11.13(d) a school district can offer an optional discount to those 65 and over that is not limited by maximum amount or percentage.  The Texas Constitution provides for optional exemptions for those 65 and over by counties, municipalities, and junior college districts.   For example, Travis County has a $65,000 optional discount for those 65 and over.  A person age 65 or over living in Travis County can take $65,000 off of the appraised value of their property, and an additional 20% or $5,000, whichever is greater, for purposes of taxes payable to Travis County.   Unfortunately, the taxes paid to the County are only a small piece of your tax assessment.   
 
In addition, Under Code § 11.26(a), a school district may not increase the total amount of ad valorem tax it imposes on the residence homestead of an individual 65 years of age or older above the amount of the tax it imposed in the first tax year in which the individual qualified that residence homestead for the 65 or older exemption under § 11.13(c).  This is commonly known as the "tax freeze."  In 2001, the Texas Legislature amended Section 11.26(g) to provide tax freeze transferability to the spouses of deceased taxpayers as long as the surviving spouse is 55 at the time of his or her spouse’s death.

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