Every homeowner in Texas is entitled to the homestead tax exemption. If you own land in Texas and qualify for this exemption, it could save you hundreds, or even thousands, of dollars on your property tax bill.
The basic requirements include:
- Live on the property for which you are claiming exemption
- If you own two homes, you must select your principal residence in order to qualify as a homestead
Applying for the exemption is fairly easy and can be done in every county in the state.
Learn more about the qualifications here: Residence Homestead Exemptions: texas.gov
Understanding Homesteading in Texas
Before starting a homestead, it’s important to understand the steps involved, including land acquisition, zoning regulations, the benefits versus challenges of homesteading in Texas, and how financing and tax considerations may impact your success.
Thorough research and planning can ensure a smooth transition into homesteading life. A great place to start is with your local farm credit union to understand your available exemptions, loan possibilities, and potential profitability.
Benefits of Homesteading in Texas
Land as an Investment
As land prices rise nationwide, rural Texas land continues to be a stable investment for many reasons. Investing in land can:
- Diversify your investment portfolio
- Protect against inflation
- Create profitable income streams through other business ventures on the land
Interested in learning more about investing in Texas land? Read more here.
Liability Protection
In addition to tax breaks, homestead exemption protects you from certain liabilities. Designating your home as a homestead can protect you so that in the event of litigation or other actions, creditors can’t come after your home.
Challenges of Homesteading in Texas
High Upfront Costs
Owning rural land in Texas isn’t always cheap. Depending on which region you purchase your homestead land in, you could spend around $4,500/acre — or more.
If you see homesteading as your long-term plan, then that cost will likely be worth it. But landowners should be aware that they might have a high bill at the beginning of their homesteading journey.
Opportunity Cost
Sometimes there are more beneficial options than homesteading your Texas acreage.
Establishing a land trust, for example, is a great option for landowners passionate about conservation. While there are charitable tax exemptions available for land trusts, the tradeoff could be that you lose your homestead exemption.
There are also other types of agricultural exemptions you may qualify for or be better suited for.
The homestead exemption can provide valuable tax reductions, so losing them could be a hit to your end-of-year tax bill. This is an important cost/benefit analysis to make, and we can help you consider your options at Texas Farm Credit.
Where to Start: Texas Homestead Exemption
Since Texas does not charge state property taxes, all exemptions are filed through your local county. You won’t file your homestead exemption immediately upon closing on your property purchase, but you can do so afterward.
- Begin by visiting the tax appraisal website for your county to find your homestead exemption application and instructions for submission.
- Once you receive your homestead exemption, that’s it: you don’t need to apply again in subsequent tax years.
Not sure how much land you can afford?
Start with our online Land Loan Calculator to find loan options that work for you and your budget.
If you don’t yet own land or are looking to expand your portfolio, Texas Farm Credit offers resources to help you through the process, from getting started to long-term wealth management.
Financing for Texas Homesteading
As you get started on your homesteading journey, it’s important to learn about what loans, grants, and tax incentives are available for your unique circ*mstances.
Types of Ag Loans for Current or Future Homesteaders
- Rural Real Estate Loans: To finance raw acreage.
- Ag Loans for Farm, Ranch, and Timber: To finance an agribusiness on your homestead land, like raising cattle or planting crops.
- Land Improvement Capital: To finance extra land improvements you need to make, like fences or wells.
Mortgage Payment Calculator
Land prices in Texas are often still higher than other spots in the U.S. However, these have come down from the post-2020 peak that saw record land prices across several Texas regions. Because of the potential high cost of financing land for your homestead, it’s important to understand exactly how much you can afford before signing your loan paperwork.
A land loan calculator is a helpful tool to take into account your customized details and goals, then estimate your total interest and principal payments. You can use the Texas Farm Credit loan calculator here.
Tax Implications of Homesteading
In Texas, a homestead exemption essentially means you receive a tax break at the end of the year. Whatever exemption you receive (for example, $25,000) would be subtracted from the total value of your home — then at the end of the year, you’re only taxed on that lowered value.
Let’s say your home has an appraised value of $300,000 and you receive the $25,000 homestead exemption. In this case, you’ll only pay property taxes as if the home was valued at $275,000.
Homestead exemptions in Texas can vary based on home value and specific location. For example, section 11.13 (b) of the Texas tax code now requires public school districts to offer a $100,000 exemption on residence homesteads located within their districts.
In some regions, you may even qualify for compounding exemptions that could save you even more money on your property tax bill.
Ready to start your Texas homestead?
Consider the location of your homestead for maximum exemptions
The value of exemptions can vary based on location. Strategic planning can maximize your savings and benefits.
Start by exploring our online land loan calculator
Determine your budget and find loan options that suit your financial situation through our online Land Loan Calculator.
Contact our team to learn about your options
Reach out to Texas Farm Credit for personalized assistance and to explore financing solutions tailored to your needs.
