Transcript
00;00;00;00 – 00;00;23;23
Mike
Today we are talking about property taxes here in Texas and the homestead exemption and kind of how it works. I’m sitting here with Phil and he he’s our resident CPA. We’re talking about homestead taxes and property taxes. It’s kind of a big issue these days, especially here in Austin, where property values have been going through the roof. What is this thing called, a homestead exemption?
00;00;23;23 – 00;00;26;16
Mike
What is it, you know, what does it really do for us? Well, the.
00;00;26;16 – 00;00;37;25
Phil
Homestead exemption is a good thing because it removes part of your property value that subject to taxation. So if you own a house, you definitely want to apply for it.
00;00;37;27 – 00;00;56;00
Mike
Essentially what you’re saying that is the homestead exemption is you can put it on your primary residence and you are reducing property taxes on that residence right? Right. Okay, great. And of course, that begs the question, what do we save here? How does this really help us?
00;00;56;01 – 00;01;07;18
Phil
It removes $40,000 from the value of the House. And you might say, hey, Phil, you know, that’s not that much with home prices going up and everything, but every little bit counts, right?
00;01;07;21 – 00;01;26;13
Mike
So 40,000 and let’s imagine your property taxes, I don’t know, 2% of the the value of your home if you’re removing 40,000. That’s like $800 a year. Now, are there any does it also help at all with how much they can jack up your prices each year, your taxes each year?
00;01;26;14 – 00;01;35;17
Phil
Yeah, that’s another real benefit. Where once you have the homestead exemption on your house, the most they can increase your property taxes is 10%.
00;01;35;20 – 00;01;46;26
Mike
Yeah. And here in Austin, like, I don’t know about y’all listening, but house home values in some places have increased significantly more than that. So that I can see that being a bit of a savings as well. Right?
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Phil
Right. Last year in Austin, homes increased 42% on average.
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Mike
How much?
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Phil
40 to.
00;01;52;24 – 00;02;06;25
Mike
- Holy smokes. Oh, boy. That. Yeah, that’s. We all know it’s been a crazy market, right? How do you qualify? What are. What do you have to do in order to qualify to get this exemption?
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Phil
Well, you have to be owner of the house as of January 1st.
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Mike
Okay.
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Phil
And you have to have valid I.D. of Texas ID, which matches your home address.
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Mike
Okay, wait. So let’s back up your so your driver’s license. Right. Has to have your your current home address. So if you just move in order to get this exemption, you have to own the property and you have to go to the what?
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Phil
The DMV.
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Mike
DMV, our favorite place. Right. And get your license updated.
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Phil
Correct.
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Mike
Is that it?
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Phil
Yeah. And then you go online and you fill out a form and you upload a copy of your ID. It usually takes a week or two to process and that’s it. Now, if you if you don’t want to go online, you can also print out the form and mail it.
00;02;54;27 – 00;03;00;28
Mike
A lot of people, what happens when you turn 65? Because I think, if I’m not mistaken, there are some special rules, aren’t there?
00;03;00;29 – 00;03;16;00
Phil
Right. So there’s a second exemption. So once you apply for your initial exemption. That’s good. You don’t have to do anything else. But when you turn 65, there’s an additional exemption that you want to apply for right away when you turn 65.
00;03;16;01 – 00;03;17;09
Mike
What is that exemption?
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Phil
Well, that varies by county in Texas, but of course, on average, it’s another $10,000 which is excluded, you know, from your property.
00;03;26;08 – 00;03;36;22
Mike
Okay. So they incur the amount of exclusion, which means less tax. Right. And it varies by county. What are there like? And you said how many counties?
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Phil
256, I believe.
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Mike
So basically 256 different rules. I’m sure many counties are similar. Right now, are there any other benefits like on you know, if you have a normal homestead, they can only increase your taxes by 10% a year. Anything else in regards to the age 65.
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Phil
Rule, while there’s in addition to age 65, there’s also like other exemptions out there that you’re available for like surviving spouse or disability. So you want to check with your county.
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Mike
Do both spouses have to be 65 or just one?
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Phil
No, just one. So as soon as one of the spouses turn 65, you should go ahead and apply for it.
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Mike
The oldest one. Right. So if you really want a homestead exemption really, really bad for 65 and you’re single, you just got to go marry someone over 65. You’re not there yet, right? Right. What if I’m 65? We apply for that special 65 rule oh. And then I die in a golf course or something. You know, I get a hold of one.
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Mike
I’m so excited. I die from a heart attack. Wow. But Becky’s not 65 yet. Let’s imagine. How does it work for her?
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Phil
Well, again, this kind of varies by county, but most counties, like if you’re 55 plus and you’re in that situation, it’s fine. That exemption just continues. Okay. Now, if you’re younger than 55, then you want to go and you want to reapply in your county.
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Mike
What happens if a surviving spouse has trouble affording his or her property taxes?
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Phil
Worst case situation like that, you’re not going to get kicked out of your house. You can apply for a special exemption where they’ll allow the stay will allow you not to pay tax. They’ll put a lean on the property. So then when you pass away, that property goes into probate. The state will collect the tax at that point.
00;05;28;12 – 00;05;54;21
Mike
Okay. So the surviving spouse can literally get away, not paying any property taxes and then but then like during that person’s lifetime. So if I die, Becky can just not pay property taxes. However, the state puts a lean in the house for those taxes. Then she dies or sells the house, and that’s when the state collects. Craig I’m guessing the state’s going to collect interest and penalties as well.
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Mike
Wouldn’t they?
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Phil
Varies by county, but yes there will be.
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Mike
Other good in.
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Phil
There.
00;06;00;29 – 00;06;16;06
Mike
Are good. It’s not. Yeah. So don’t be going out and just saying oh my spouse died. I’m just not going to pay property taxes. Right? Right. Probably not the best idea. But I think it’s, you know, a nice stopgap for those that are in a position where they can’t afford things. Right.
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Phil
Right. I mean, it’s crazy how many people are eligible and they just don’t simply apply and they don’t even know. 5 minutes.
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Mike
Yeah. By the way, it’s true story. My son, my own son who bought a house, he the first year that he was I think would you say he was eligible for Homestead but he didn’t apply and actually his property taxes went up and he’s telling my wife about it. And she said, well, didn’t you apply for your homestead exemption?
00;06;44;19 – 00;07;07;21
Mike
And his comment was, what’s that? So so you’re right. A lot of you got to apply. That’s a really good point. All right, Phil, thanks so much. Great information. I hope you enjoyed it. That’s our talk. Property taxes, homestead exemption, age 65 rules. Make sure you’re getting everything that you are. Do you want to make sure you’re not paying extra tax if you don’t have to write?
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Mike
All right. That’s it. We’ll see you next time.
