What is the Residential Homestead Exemption?

the woodlands, taxes, real estate, home, property, agent

The Residential Homestead Exemption is essentially a tax break offered for homeowners. The exemption reduces your property taxes by lowering the value of your home’s taxable value that the tax liability is based on.  For example, if your home’s appraised value is $100,000 and you qualify for a $15,000 homestead exemption, then your tax liability would be calculated on a tax basis of $85,000 instead of $100,000.

All of the school districts within Montgomery County offer a general residential homestead exemption of $15,000 to qualified homeowners. The qualifications are listed below.

Are there other exemptions available?

Yes, there are.  Montgomery County offers a $35,000 exemption to homeowners who are over the age of 65.  In addition, all of the school districts within Montgomery County offer an additional exemption of $10,000 for “Over-65” homeowners – this is on top of the general residential homestead exemption already taken.

There are other exemptions available depending on your area, age and physical status, which may be offered by your county, school district, city, or special district. If offered, these are always a minimum of $5,000 off the appraised value of your home and a maximum of 20% of your home’s value.

How do I qualify for the Residential Homestead Exemption?

The basic residential requirements are:

  • You must own, occupy, and use the home as your principle residence on January 1.
  • You may only have 1 principal residence.
  • Your home can be on leased land, as long as you own the structure (so this includes condominiums and manufactured homes).
  • Your homestead can include up to 20 acres, as long as that land is used and maintained as part of your yard.

If you have a home that meets these qualifications, there are other rules about getting the exemption: you cannot claim parts of a home that you are renting or using for business purposes, you cannot claim a homestead exemption on more than one property, and you may not claim a homestead exemption if your spouse is also claiming one on that property.

The Homestead Exemption affects your tax liability in two important ways.

1. It reduces your annual tax bill. The calculation is basically this: whatever exemption offered by a “taxing unit” (i.e. school district, city, etc.), you remove the exempted amount from the value of your home before calculating the taxes you owe.

Here’s an example. Let’s say your home is appraised at $300,000 and you reside in Montgomery County, Conroe Independent School District (CISD).  You don’t qualify for any optional exemptions, but you do qualify for the general $15,000 homestead exemption offered by CISD. So when calculating your 1.285% school district tax, you can lower the value of your home to $285,000.

So rather than pay 300,000 x .01285 = $3,855 in school district taxes,

You would pay: 285,000 x .01285 = $3,662.25. Not a bad deal.

2.   Another benefit of the homestead exemption to your tax liability is that the appraised value of the residential property that is exempted is automatically capped in the following year at a 10% increase.  In other words, the taxable appraised value of your primary residence cannot increase by more than 10% each year.

If you have any questions regarding your own qualification for the exemption, or for exemptions offered by taxing units, visit the Montgomery County Appraisal District website, or post your questions in the comment section and I’d be happy to help explain as best I can.


 

Image: porbital / FreeDigitalPhotos.net

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Comments

  1. Hello, great read on that one about Residential homestead exemption. Nice blog. Keep up posting! Cheers, Michael.

  2. I like reading information about Residential homestead exemption. Are you sure about what you was writing? Best wishes, Thomas.

  3. Our research on this entry and topic was pulled from the Montgomery County website, http://www.mcad-tx.org/html/homestead.html

    We certainly are not government experts, but have tried to make this topic understandable to buyers and sellers interested in real estate in our community. Our intention is to be helpful. Please feel free to consult the county site for any further clarification required.

    Thank you for reading and for your comments!

  4. When does the exemption actually take effect? I applied in april of 2015 but have yet to see a reduction in my mortgage payment/property taxes…

    I have heard it takes place the following January…do you know if this is rrue?

  5. Courtney Buie says:

    You must live in the property as your homestead on January 1 of the year for which you are applying.

    For example, if you lived in the property on January 1, 2015 as your homestead, you have from January 1, 2015 – April 30, 2015 to apply for the homestead exemption for the calendar year of 2015. Once approved, the exemption is in effect on your property for the entire calendar year of 2015.

    I hope this answers your question!

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