What is a Homestead Exemption?
Posted Jun 10, 2007 @ 8:32 pm, Viewed by 811 Visitors, Read 824 Times.
When buying a home, you've probably gotten advice from relatives and friends about ways to save money. One of these ways is filing exemptions on your property after you obtain ownership.
There are various types of exemptions in the Houston real estate market, such as the general residential, age over 65, disability and over 65 surviving spouse. However the most widely used exemption is the general residential exemption, also known as the Homestead exemption.
Don't get confused; the homestead exemption and claiming homestead on your property are two different things. When you claim homestead on your property, you are claiming to your local taxing authority that this is your primary residence and it cannot be taken from you nor can it be forced to be sold by demanding creditors.
When you claim your homestead exemption on your home, you are telling your taxing authority that you lived in the property on January 1st of that year, and are therefore entitled to a discount on your property taxes when they come due.
In Texas, property taxes are due by January 31st of the following year. This is the time when you will realize the savings. I've found a good way to estimate your savings is to take a 20% reduction in the amount you would normally owe, however realize that the discount applied is different for each taxing authority you pay property taxes to (water district, schools, etc.). The 20% rule is a good conservative estimate.
So remember: If you are living in your property on January 1st of any year, you are entitled to claim the homestead exemption on your home and realize savings! You will also want to disregard the notices sent to you by companies offering to file this exemption for you. It's very easy to file in Houston; it's simply a matter of sending in one piece of paper!
Note: I am not a CPA. Please consult with your accountant to get the details on this exemption as it applies to your situation. The above information is specifically tailored for the Houston Texas Real Estate market, however many of the same concepts apply to other cities in Texas.
There are various types of exemptions in the Houston real estate market, such as the general residential, age over 65, disability and over 65 surviving spouse. However the most widely used exemption is the general residential exemption, also known as the Homestead exemption.
Don't get confused; the homestead exemption and claiming homestead on your property are two different things. When you claim homestead on your property, you are claiming to your local taxing authority that this is your primary residence and it cannot be taken from you nor can it be forced to be sold by demanding creditors.
When you claim your homestead exemption on your home, you are telling your taxing authority that you lived in the property on January 1st of that year, and are therefore entitled to a discount on your property taxes when they come due.
In Texas, property taxes are due by January 31st of the following year. This is the time when you will realize the savings. I've found a good way to estimate your savings is to take a 20% reduction in the amount you would normally owe, however realize that the discount applied is different for each taxing authority you pay property taxes to (water district, schools, etc.). The 20% rule is a good conservative estimate.
So remember: If you are living in your property on January 1st of any year, you are entitled to claim the homestead exemption on your home and realize savings! You will also want to disregard the notices sent to you by companies offering to file this exemption for you. It's very easy to file in Houston; it's simply a matter of sending in one piece of paper!
Note: I am not a CPA. Please consult with your accountant to get the details on this exemption as it applies to your situation. The above information is specifically tailored for the Houston Texas Real Estate market, however many of the same concepts apply to other cities in Texas.
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