How Does The 10% Property Tax Homestead Cap Work?

There are many advantages to living in the Lone Star State. So, while tax benefits might not initially seem as appealing as the diverse family friendly cities, warm climate and endless country roads, if you’re a property owner in Texas, you won’t want to miss out on the valuable Homestead exemptions and the extra benefit of the 10% Property Tax Homestead Cap that goes along with it. Here’s what it’s all about: 

Homestead Explained

Homestead is a general exemption intended for Texas homeowners whose property is considered their primary residence. It can be a house, condominium, or manufactured home on owned or leased land as long as you live in the structure and own it. A homestead exemption can also include up to 20 acres of land if the land is owned by the homeowner and used for a residential purpose, such as a yard. An applicant is required to state that he/she does not claim an exemption on another residence homestead in or outside of Texas.  You can find the application paperwork here: https://comptroller.texas.gov/forms/50-114.pdf

Homestead & Schools

Homestead requires that school districts offer a $25,000 exemption on residence homesteads. Plus, it allows any taxing unit the option to decide locally to offer a separate residence homestead exemption of up 20% of a property’s appraised value. This local optional exemption can’t be less than $5,000. 

Homestead & Farms

-Also, Texas counties that collect farm-to-market or flood control taxes are required to offer a $3,000 residence homestead exemption. 

For more information and specific tax codes go to: https://comptroller.texas.gov/taxes/property-tax/exemptions/ and click on Residence Homestead.

10% Property Tax Homestead Cap

The Homestead Cap is an extra property tax benefit of the general Homestead exemption. The “Cap” limits increases in assessed values for homestead properties. This is one of the most valuable exemptions out there and is especially important in today’s world of rapidly rising home values. Homestead Cap applies to your homestead starting the second year that you have a homestead exemption. If you qualify, your taxes calculated on the assessed value cannot exceed the lesser of: the year’s market value or last year’s assessed value (plus 10%, plus the value of any improvements made the preceding year).

Learn about Homestead tax exemptions and other valuable exemptions you may qualify for. Contact Gill, Denson & Company for more information. While our team cannot file exemptions on your behalf, we strive to guide you in the right direction as you work with the appraisal district.