Rationale for homestead laws
In Texas, homestead laws were first promulgated in the 1800s to protect homeowners and farmers from losing their lands through foreclosure. When the 1837 Depression resulted in landowners at that time failing to pay on their mortgages and having their lands foreclosed, the State saw the need to come up with legislation that will ensure that families will not lose their land due to extraordinary economic fluctuations and thereupon become public welfare burdens. Homestead protection laws came to form an integral part of the State’s constitution.
A homestead is simply put, residential land where the family builds its home. The land and the improvements thereon form part and parcel of the homestead. An urban homestead is a residential homestead with an area of up to 10 acres while a rural homestead is one with an area of up to 200 acres. Notwithstanding the value of the land, the homestead identification is based on the size of the land.
Protecting the homeowner and his family
So that they will not be homeless and become burden to public welfare, the Texas homestead exemption prohibits the forced sale of the property to satisfy all creditor claims against the homeowners. The law specifies certain liens that may be attached to the property strictly for purposes of financing the purchase of the homestead, paying taxes due on it, financing the renovation of any improvements on the land, for partition purposes due to probate or divorce, and as security for home equity loans as provided for by the Texas Constitution.
Texas homestead exemptions
The Texas Constitution provides for homestead exemptions that enable the homeowner to pay lower taxes on the property. If it is appraised at market value of say $100,000, certain exemptions will apply so that valuation is reduced and the corresponding tax likewise reduced. The exemptions that may apply include school taxes (up to $15,000), county taxes for flood control or infrastructure (up to $3,000), general homestead exemption (up to $15,000), disability exemption (up to $10,000), optional percentage exemptions granted by a city, county, school or special district (up to 20% of appraised value of the building or $5,000 whichever is higher).
In order for a homeowner to avail of the exemptions, he or she must satisfy the definitions and requirements for a residence homestead as stipulated in the Texas Constitution.
Filing for Texas homestead exemption
Any new homeowner, a recent buyer or builder, of a residential property in Texas may file for the Texas homestead exemption. The principal residence of the homeowner will always qualify, subject to certain conditions being satisfied under the State’s Constitution. Even if the homeowner does not occupy the home continuously, for example if the owner is in the military and gets assigned elsewhere for a year maybe, the exemption will still apply as long as the home remains the principal residence of the owner. The exemption ends when ownership is transferred by ultimate sale.
In Austin, as in other areas of Texas, you can seek legal and tax advice on applicable homestead exemption revenue rules. This redounds to not only savings in taxes payable but equitable access to public services that your taxes help fund and support.