Texas Property Tax Relief – What You’ve Heard and What You Haven’t Heard

With rising property taxes in Texas, especially in the DFW area, everyone is wondering how to decrease their property taxes. On numerous occasions, Texas politicians have stated that cutting property taxes would be top priority. So much so that the Texas legislature set aside $17.6 billion from the state’s budget for property tax relief.

The Part Everyone is Talking About – Homestead Exemption

Finally, after what seemed to be a never-ending deadlock, on July 10, the Texas legislature passed tax-cut legislation providing $18 billion of property tax reductions for Texas homeowners. Some of the noteworthy benefits to residential homeowners are outlined below:

• Over $12 billion will be spent on reducing the school property tax rate for all homeowners and business properties.
• Every homeowner who homesteads their home will get a $100,000 homestead exemption.
• Non-homesteaded properties, valued at $5 million and under, including residential and commercial properties, will receive a 20% circuit breaker on appraised values as a 3-year pilot project.

The Part You Probably Haven’t Heard – Principle Residence in Qualifying Trust

In addition to the major tax-cut legislation, Texas also made one necessary legislative change in its 88th Regular Session that you probably haven’t heard about.

One of the most effective ways to reduce property taxes is to qualify your Texas home as your homestead; doing so allows property owners to receive a $100,000 homestead tax exemption, an increase from $40,000 thanks to the aforementioned tax cut legislation.

This exemption doesn’t just apply to principal residences owned by individuals. It also applies when homeowners choose to take advantage of Texas trust laws by transferring their principal residence to a qualifying trust.

For homestead tax exemption purposes, the term “qualifying trust” means a trust that allows the creator of the trust or the beneficiary the right to use and occupy the residential property as the primary residence. However, for years, what constituted homestead protection for property tax purposes, failed to also constitute homestead protection against creditors which resulted in unnecessary litigation.

A new Texas law solves this problem by conforming the rules on homestead protection from creditors for residential properties held in trust with those for homestead exemptions for property tax purposes. In other words, the trust language required to qualify property in a trust for a homestead tax exemption is now the same language required to protect your homestead from creditors, resulting in much needed clarity from the Texas legislature.

If you have questions on transferring your property to a qualifying trust, we can help with that. Contact us at 469-916-7700, or send us an email.