What Is The Difference Between Homestead Taxes And Property Taxes And Do You Have To Pay Both?
A Reader Asks…
I read an insert for a home that my husband and I were looking at and part of it stated: “property taxes $—-.–, however homestead taxes are much lower”. I am assuming that these two are different kinds of taxes, but do you have to pay both and why is one cheaper than the other?
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July 29th, 2009 at 11:34 am
It is more correctly called a homestead exemption to the property taxes. If your property value, for tax purposes only, is $100K and your tax rate is 3%, then you pay the taxing authorities $3K for the year ($100K x .03 = $3K). If you have a homestead exemption, then if your house is valued at $100K for tax purposes, the taxing authorities knock off (or exempt from taxation), say, $30K. So now you pay 3% on $70K, or $2100.
This is an example from my part of Texas. Taxes are assessed on a county level and range from 2.8 to 3.2%. In Houston, the median price of houses run around $120K. Yes, our property taxes *are* high, so homestead exemption is pretty significant. btw, we don’t have a state income tax, so there is some compensation.
July 29th, 2009 at 4:27 pm
Yeah, what helblindi said. Kinda summed up like this:
(In Texas anyhow) If you own two identical houses and live in one of them, you pay lower taxes for the one you live in….
One last thing though – close on the house in December, not January. The taxing authority determines eligibility to claim exemptions based on who owned the house on January first of the year. So if you want to take any exemptions for 2007, close in December. If the seller needs to stay until sometime in January, do a temporary seller’s lease back.
July 29th, 2009 at 8:46 pm
You don’t understand that correctly. At first you have to pay straight taxes that is more. If you live in the property then you can homestead it and get a homestead exemption. Something you can;’t get on a rental property you buy.
then it was about half as much in taxes. But if I move out and rent this place to someone else I lose my homestead exemption.
So as soon as you buy it and move in go to the court house and ask for the exemption. You don’t just automatically get it.
I found out about it and it saved me a bundle in property taxes.