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Texas Tax Code Caps Homestead Exemptions at 20% of Property Value

Texas Tax Code Caps Homestead Exemptions at 20% of Property Value

Texas residents might enjoy a homestead tax break of up to 20% of the appraised value of their home, depending on what amount is provided for by their local property tax authority. But what if a city wanted to give homeowners a bigger break? Would that require a change to Texas statute or the state Constitution?

The short answer is, under current Texas law, the homestead exemption is capped at 20% and any expansion would necessitate a change to a state statute, but not a constitutional amendment. This is because the Texas Property Tax Code section 11.13(n) states unequivocally that the homestead exemption cannot exceed 20 percent.

How this works is, if a home was valued at $100,000 and the taxing authority allowed for a homestead exemption of 20%, then the property owner is taxed on the first $80,000 of the property’s appraised value. The one-time exemption is only meant for primary residences and not to be used for rental properties.

The tax code puts it this way: “In addition to any other exemptions provided by this section, an individual is entitled to an exemption from taxation by a taxing unit of a percentage of the appraised value of his residence homestead if the exemption is adopted by the governing body of the taxing unit before July 1 in the manner provided by law for official action by the body. If the percentage set by the taxing unit produces an exemption in a tax year of less than $5,000 when applied to a particular residence homestead, the individual is entitled to an exemption of $5,000 of the appraised value. The percentage adopted by the taxing unit may not exceed 20 percent.” (emphasis added here in bold)

Thus, state law would preempt any city ordinance to the contrary. The only way for a city in Texas to be able to raise the exemption from 20% to 100% – or any percentage in between – would be an amendment of that subsection of the statute. In the Texas legislature, a bill to amend a statute may be introduced by a representative or a senator. During the first 60 days of a regular legislative session, bills on any subject may be introduced. After that 60 days, the introduction of any bill other than a local bill or emergency bill must be introduced by consent of at least four-fifths of the members present in the house or senate. In this case, the city’s representative could introduce a bracket bill – a “legislative measure intended to apply only to a particular class of political subdivisions or geographic areas described by characteristics that relative to the purpose of the law.”

The Texas Constitution lists in great detail the protections afforded to homesteaded property and the very specific requirements for foreclosing on a homesteaded property; it also defines the maximum size of a homestead and some other features. Those rules could not be changed without a constitutional amendment. (Amending the Texas Constitution requires a joint resolution of both houses of the Texas legislature, approved by at least two-thirds of the representatives of each house, and then a majority vote in an open election.)

However, certain other facets of homestead law, like, for example, the 20-percent exemption, or the requirements for applying for a homestead exemption with a county taxing authority, are in the statutes and not the constitution; therefore, they could be changed without a constitutional amendment.

Please do not rely on this article as legal advice. We can tell you what the law is, but until we know the facts of your given situation, we cannot provide legal guidance. This website is for informational purposes and not for the purposes of providing legal advice. Information about our real estate practice can be found here.

Drew Shirley is a Houston attorney with experience in tort and business litigation and business and real estate transactions. Shirley graduated cum laude from Duke University, then received two advanced degrees – a master’s in journalism and a law degree – from the University of Texas at Austin. He joined the Randle Law Office in 2015.

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