What is the Homestead Exemption?

Photo by MOHD AZRIN on Unsplash

I can’t tell you the number of times I’ve received questions about the topic of today’s blog! “What is a homestead exemption, why do I need to file for one, and how do I do that?”

Before we start, I have to warn you that once you buy your home, you will receive loads of marketing mail pertaining to the homestead exemption. Disregard all of these! These are from people/companies offering to file your homestead exemption for you, but filing is truly one of the easiest post-homeownership tasks out there, and I’m going to show you how you can do it yourself. 

As home prices have increased in the last few years, so have the taxes on residential property. These taxes are often a primary concern for home buyers, especially if they are on a limited income, retired, or first-time home buyers. 

Thankfully, there are multiple types of exemptions that you can file to help with that bottom line. 

The General Residence Homestead Exemption is the most common exemption that most of my buyers qualify for. You must live in your home to qualify for this exemption–easy, right?

Other variants of this exemption include:

• Disabled Homestead

• Residence Homestead of 100% or totally Disabled Veterans

• Disabled Veteran or Survivors of a Disabled Veteran

• Over-65 Exemption

All of these utilize the same application form. The Homestead Application is a simple, two-page document that outlines what the appraisal district needs in order to process your exemption. The third page of the document has important information that should also be read by buyers prior to filing the application, including qualifying information about the exemption variants in case you are unsure which specific exemption to apply for. (Again, most buyers qualify for the General Residence Homestead Exemption.)

If you want to, you can fill out the application (which is limited to basic information about yourself and the property) and send it to the county as soon as you close on your transaction. A former rule required you to live in the property on January 1st, but that rule has now been dissipated. Now, all that you need to do is file the application online as a post-closing task–and if you are a client of mine, I’ll send you the link to do so via text message as a reminder!

Another benefit of filing a homestead exemption is the homestead cap. This rule actually came into effect for my own personal property this year! Once you have lived in your homestead for two years with the exemption in place, there will be a cap on how much your taxes can be raised each year. 

In general, the ASSESSED home value for a homeowner who qualifies for a General Homestead Exemption in the preceding and current year, may not increase more than 10 percent per year.

Source: BCAD.org 

In light of this, it’s important to protest value within those first two years if you see significant increases in your assessed value–especially if they are not in conjunction with your purchase price. You can always use your closing disclosure as evidence when this may be the case. When the appraisal district sends you the new assessed value each year, be sure to think back to your purchase price and make sure those numbers don’t show a huge disparity. 

And that’s the gist! If you have any questions not answered here, feel free to contact me.