Earlier this year I wrote a blog post about the Homestead Exemption in Texas. I've received some requests for some additional ideas on the subject... so here goes:
In Texas, we Texans are very proud of our homes. We treasure them. It appears the Great State of Texas treasures them, too. The Homestead Exemption is just one more thing Texas has done to encourage home ownership.
The basic Homestead Exemption is sort of like a "discount" on a homeowner's real estate taxes. In Texas, if you take title to a home by the end of any calendar year... and if you use that home as your primary home... your "homestead..." Texas allows you to apply for the Homestead Exemption.
How it works in brief is this. There are many different "entities" that tax Texas homeowners. A city tax, school district tax, water district tax, hospital district tax, and probably at least several more.
Each home in Texas is given an "assessed valuation" by the county in which the property exists. For this example, let's say a home that may have a "market value" of $175,000... is given an "assessed valuation" by the county... of $150,000. Then, the different taxing entities take their own tax rates... so many dollars per $100 dollars of the property's assessed valuation... and multiply that rate by the valuation. That becomes that part of each homeowner's total real estate taxes.
With the Homestead Exemption... each of these entities "excludes" a portion of each home's assessed valuation... thus declaring that portion... let's say... $20,000 in one case... will be excluded from the amount being taxed. So... in the above example... a property valuation of $150,000... less the "exclusion" of $20,000... ends up being taxed for the remaining $130,000 of its valuation... thus making the $20,000 difference... "tax free."
There are many types of tax exemptions... the Homestead Exemption is just one of them. Other exemptions can be given for being over age sixty-five, being disabled, and some other categories, too.
The Point Here: Many first time buyers are unaware that they could very easily get a "discount" on their real estate taxes simply by purchasing a home... and closing on it by December 31, 2007. By using this knowledge as a closing tool... some first-time home buyers may actually see one more good reason... to get "off the fence" and buy a home earlier than they previously wanted to.
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