Property values had a great run in 2015. Upward, that is.
While that’s still great news, higher property values can mean higher property taxes. In Houston, the average price of a single-family home increased by 17.4 percent in 2015. That could result in a big surprise from the tax collector.
Property tax exemptions are not exactly nickels and dimes. A 20 percent exemption on a $250,000 home, takes the owner’s tax liability down from $6,250 to $5,000 in taxes. Exemptions don’t interfere with the value of the home, just the amount of taxes the owner will pay.
One exemption available to the average homeowner is the homestead property tax exemption. Anyone who owns a single family home, townhome, condo or mobile home within Texas is eligible for the state and county exemption programs. The owner must use the home as their primary residence, and own the property by January 1 of the year for which they will claim the credit.
To reduce the tax bill, homeowners need to apply for that homestead property tax exemption. When granted, the exemption lowers the tax rate on the home.
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Many states have their own exemption programs. As Texas has no state tax on income, the state collects most of its revenue from sales and property taxes. The average residential property taxes in Houston are about 2.5 percent of the taxable value of a home per year.
Harris County provides a 20 percent optional homestead exemption to homeowners within the area, but any taxing unit (school district, city, county or special district) can offer an exemption. The exemption can be for as much as 20 percent of a home’s value. And, an optional exemption can be for no less than $5,000.
Granting an exemption can cut the value used to compute school district taxes by at least $15,000. If the homeowner is disabled or 65 years of age or older, they may get an additional $10,000 school tax exemption on their home.
Those over 65 or disabled may also benefit from a permanent ceiling that can be placed on the school property taxes. That special benefit transfers to the surviving spouse, if the spouse is 55 years of age or older at the time of death and lives in and owns the home. That can be transferable to a new home.
The general homestead exemption also has a cap provision. The cap applies to the homestead beginning in the second year of a homestead exemption. If homes are appreciating at more than 10 percent per year, the cap can provide substantial tax savings.
Owners need only fill out an application for the homestead property tax exemption and file it between today and April 30, 2016, with appropriate proof of ownership and residency. That can be a copy of the driver’s license, and a copy of a utility bill or car registration. Both documents must show the address of the residence.
