What's a Homestead Exemption in Texas and do I have to Pay for It?

I hear these questions often when I am with one of my home buyers. So, I thought I would try to help clear up a few questions... if you are interested.

The most common question I hear is, "how much does it cost?"

The answer is nothing! It is free to file your homestead exemption. There are several companies out there that will send you a very official-looking form after you close on your new home. (They get your information when they check county records for newly, publicly recorded deeds.) The form will say that it requires, for example, a $35 or $55 fee or whatever amount the sender requests. Many people mistakenly think that they are required to pay this fee because these companies make it look so official.

The next question I hear is, "when can I apply for the exemption?"

You can apply for it starting on the following January 1st after you purchased the home (if you are not busy eating black eyed peas and recovering from New Year's Eve.) In fact, I send all of my clients the form they need to apply for the exemption... and I think many other Realtors do as well. You have from January 1st of the following year after you purchased until April 30th.

So, now you are probably wondering about who qualifies?

Any home owner who is making that property their principal residence may apply for the homestead exemption. Also, the home owner must be an individual. For instance, it cannot be a company purchasing a home where the CEO might be planning to live, even if the CEO owns that company.

Why would I really care about applying for this?

Two main reasons. The first one to remember is that it will save you money because the tax man (in effect) lowers their perceived value of your property. It varies depending on where you live. But, here is a good example. If your home is valued at $1,000,000, and you qualify for a $15,000 tax exemption, you would only pay taxes on the valued amount of $985,000.

The other main reason is that if you are being forced to sell off your property to a creditor, the creditor will not be able to take your home since it is your homestead.

There are many different exemptions you may qualify for. So, be sure to check on your local county's tax website. A good resource in the Austin area is: traviscountytax.org and traviscad.org