The Importance of the Homestead Exemption

Don't leave money on the table

Updated on January 7, 2022

Happy New Year! With the holidays behind us, it is time to start planning for property tax season 2022. Given the HOT HOT real estate market in Austin in 2021, I expect appraisals to be sky high this year. I am estimating the appraised market values to be 20% - 30% percent higher than last year!!! And the only way to keep your property taxes lower is to ensure you have the Homestead Exemption.

Do I have Homestead Exemption?

What is the Homestead Exemption?

Homestead Exemption is a provision in the Texas Property Tax Code which removes part of your home's value from taxation. For example, let's assume your home is appraised for $250,000 and it has a homestead exemption, you will pay property taxes on a reduced amount. The amount of the reduction varies by the taxing unit, but school district reduction is a mandated $25,000, so in our example you will be paying school district property tax on $225,000. Round Rock ISD tax rate is 1.3048%, so anyone with a homestead exemption will automatically save $25,000 * 1.3048% = $326.20 every year! Considering other taxing unit exemptions, the savings from the homestead exemption can easily add up to $400 every year.

The other critical benefit of the homestead exemption is the 10% increase limit of the home's assessed value (assuming no new improvements were added to the property). Let's consider an example. Suppose in 2020 the appraised home value was $300,000 and in 2021, the appraised home value is $360,000. Since 10% of $300,000 is $30,000, this homeowner will pay property taxes on $330,000 instead of $360,000! That's an additional $750 in savings! Ok, now let's step away from the hypothetical examples, and let me demonstrate a real world scenario which I mentioned at the beginning.

Real Savings Example

Case in point is our neighbor in the Brushy Creek neighborhood. See the graph below:

The red line is the home's appraised value. The blue line is the assessed value (this is the value used to calculate the amount of property taxes paid). As you can see, the cumulative difference between the appraised value and the assessed value is approximately $321,000. At the total tax rate of 2.229%, that's savings of $7,155 over nine years. In addition, because of the reductions from various taxing units, there's an additional savings of $389 per year. In total, this homeowner saved $10,656 in property taxes over nine years, or $1,184 per year!

Who Qualifies for the Homestead Exemption?

This all sounds great, but not all homes qualify for the homestead exemption. In order to qualify,

  • A home must be owned by an individual, not a corporation/business entity, and
  • It must be the owner's principal residence on January 1st of the tax year

Not sure if you have a homestead exemption and whether you qualify? Search for your address on the form below:

Homestead Exemption Check

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