What Tax Breaks Do Homeowners Receive in Texas?
Buying a home has many benefits, both personal and financial. Because it’s perhaps the biggest investment you’ll make in your lifetime, it’s important to understand the extent of the financial advantages. Are you buying your first home or considering a move to the Lone Star State? If so, you’ll want to know what tax breaks homeowners receive in Texas.
Basics of Property Taxes in Texas
Property taxes in Texas are paid by the property owners. The amount is determined by the local government, which assesses the value of the home and/or land. The collected property taxes are used to fund local infrastructure, such as emergency services (police, fire department, hospitals), schools, and roads.
The State of Texas does not have a state property tax but does set laws that allow local governments to determine and collect them.
When do I pay my property tax in Texas?
Property taxes in Texas are paid once a year, with the tax bill going out in October for the coming year. If your mortgage includes property tax, a portion of your monthly payment goes toward the taxes. The lender pays the property tax bill with those accrued funds.
When you buy a home, you usually pay three months’ worth of property tax with your closing costs, depending on the time of year you purchase your home. For example, if you close on your home in July and the seller has already paid taxes for the entire year, you will be responsible for the amount of taxes that have been paid for the remainder of the year. You’re essentially repaying the amount of the annual property tax from the time you take ownership.
How are property taxes calculated?
The property taxes in Texas (like every other state) are based on the assessed value of your home. Don’t confuse this with market or appraised value. The assessed value is usually below fair market value, which is in your favor since it’s used to determine how much you’re going to owe!
The tax assessor bases the value of your home on several factors, including the location, size of the land and the home, and any special features, such as a swimming pool. If you make improvements to your home—like an addition, finishing an unfinished space, or converting the garage to a living space—the value increases, which raises the assessed value and your property taxes.
But your tax bill doesn’t stop there. Next, let’s look at tax exemptions in Texas that reduce your tax bill.
What are property tax exemptions in Texas?
The assessed value is just the start of your property tax calculation. Tax exemptions in Texas are deductions allowed by the government for certain situations and conditions. These exemptions can be a percentage or a fixed amount deducted from your property tax bill.
The residence homestead exemption in Texas allows for a $40,000 deduction. To qualify, you must have ownership interest and live in the home as your primary residence. The home could be attached (condo, townhome) or single-family residence, with up to 20 acres, as long as the land is used for residential purposes (not commercial). Property owned by a business entity doesn’t qualify for the residence homestead exemption.
You must apply for the homestead exemption no later than April 30th of the tax year for which you are applying.
Another of the Texas tax breaks allows for a $10,000 deduction in your property tax for people who are disabled or age 65 or older. This exemption is in addition to the $40,000 residence homestead exemption. You can qualify for the disabled person’s exemption if you are currently receiving disability benefits from the Social Security Administration.
Tax freezing is another benefit for Texas homeowners 65 years or older: You can freeze your taxes. Also known as a tax ceiling, this benefit puts a limit on how much your property tax increases. And here’s why. Since a large portion of your taxes goes to fund schools and your children are adults who aren’t using this benefit, your school district taxes cannot go up as long as you own your home. This same benefit can pass to the surviving spouse as long as they are at least 55 years old when the owner passes.
Disabled veterans and their surviving spouses are also entitled to tax breaks in Texas. The amount of exemption is determined by the veteran’s disability rating, from 10% to 100%. The deduction is usually between $5,000 and $12,000 of the property’s assessed value.
A surviving spouse can claim an additional $5,000 exemption if the service member dies while on active duty. The surviving spouse's homestead deductions are only allowed if they have not remarried since the death of the service member's spouse.
Plenty of Quality Homes for Sale Near Austin, TX
Texas tax breaks add even more incentive for moving here! The quality of life—including affordable living, exceptional schools, an extensive variety of things to do, and a temperate climate—is the reason that so many people have chosen to relocate to Texas. And the Austin area in Central Texas is one of the fastest growing regions. With a thriving economy, Austin offers something for everyone: recreation, nightlife, cultural attractions, special events, shopping, dining, and more.
Dream Finders Homes specializes in developing communities of new homes for sale near Austin, TX. We choose desirable locations for our neighborhoods, with close proximity to what you want and need.
Blanco Vista is a master-planned community that spans 575 acres in San Marcos, TX. Dream Finders Homes offers 1- and 2-story, 3-bedroom home designs, from 1,597 to 2,015 square feet of interior living space. No matter which home you choose here, Blanco Vista feeds your leisure pursuits. The swimming pool, picnic pavilion, splash pad, hiking and biking trails, and fishing lakes add to your enjoyment of living here.
Castlewood is located in Taylor, Texas, an easy commute to East Austin. This Dream Finders community of new homes for sale near Austin offers your choice of 45, 50, and 60-foot homesites. Our curated portfolio of 2- and 3-bedroom home designs complement one another while also creating a neighborhood of appealing and unique homes. Castlewood residents enjoy the community parks, and walking trails, as well as the nearby amenities at Lake Granger, sprawling Murphy Park, and quaint Downtown Taylor.