How Much Does the Homestead Exemption Lower Your Tax Liability?

Northern Texas Real Estate Podcast with Anastasia Riley

If you apply for a homestead exemption by April 30 of this year, you can lower your tax liability. By how much, though, depends on where you live.

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How much does applying for a homestead exemption lower your tax liability?

Texas has a long and proud tradition of protecting homestead property. Originally, the purpose of the homestead exemption was to encourage settlement by providing early settlers protection against creditors. The wives and children of early settlers were also protected by receiving the right of occupying the house, even in the event of the husband’s death.

Over the years, things changed, and now, lowering your tax liability is the main function of the homestead exemption. Here in Texas, we don’t pay any income tax, so the state raises most of the working capital to pay for schools, parks, emergency response services, etc., by collecting property taxes.

If you purchased your primary residence last year, you have until April 30 of this year to apply for your homestead exemption. Doing so is free and easy—all you have to do is visit your county’s appraisal website, download and fill out the proper form, and then submit it along with a copy of your driver’s license and your new address.

How much the homestead exemption really reduces your taxes varies based on where you live. Remember, your overall tax bill includes taxes assessed by your county, school district, city, and county college district (if it has one). For example, if you live in McKinney in Collin County in Frisco ISD, you’ll be able to lower the portion of your taxable property value collected by your county by $15,000. You won’t get any discount from the city portion, but you’ll get a $25,000 discount on the taxable portion charged by your school district.

If you purchased your primary residence last year, you have until April 30 of this year to apply for your homestead exemption.

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As another example, if you live in Fort Worth in Tarrant County in Keller ISD, you’ll be able to lower the portion of your taxable property value collected by the county by $20,000 and by $25,000 from the school district. As with living in McKinney, though, you won’t get any discount from the city portion.

Another advantage of filing for homestead exemption is it caps how much your taxes can go up each year. In our area, the limit is 10%.

The calculations can be a bit complicated, so if you’re curious how much you can save by filing for a homestead exemption in your area, send me a text or shoot me an email, and I’d be happy to do the math for you.

If you have any more questions about this or any other real estate topic, don’t hesitate to reach out to me. I’d love to help you.

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