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    The Big Reason Why you Need to Buy Before 2021

    Do you have plans to buy a home in 2021? Michele Harmon Team knows no one enjoys paying taxes. Therefore, Michele Harmon Team recommends choosing to purchase a home prior to December 31st, 2020 in order to save money in taxes. How is this possible? Texas gives homestead exemptions for homeowners each year. A homestead exemption helps you save on taxes by removing a part of your property’s value from taxation. Could you use more money in your pocket? If so, consider starting your home search now.

    What kind of Savings Can you Expect?

    Home exemption amounts can vary, however, according to Woodgroup Mortgage, in Texas, the general homestead exemption available to qualified homeowners is worth $25,000. Meaning, a home valued at $175,000 will only be taxed on $150,000 of that value. Depending on the value of your home, these savings can add up quickly! With a $175,000 home, you can save up to $650 a year.

    Buying a Home with an Existing Homestead Exemption

    According to the Harris County Appraisal District, when you buy a home, the taxes for the year will generally be prorated at closing. The proration at closing will be based upon the estimated taxes due. If you purchase a home that only has a general homestead exemption on it, the exemption will normally stay in place the entire tax year. However, as the new owner, be sure to file an application in your name for the following tax year. 

    How do you Qualify for a Homestead Exemption?

    If you are looking for ultimate savings for the upcoming tax year, here are a few things that will qualify you for a homestead exemption:

    • You own your home prior to January 1st of the current tax filing year.
    • The home you are filing is your primary residence
    • You do not claim a homestead exemption on another property.
    • You can show identification with the address that is to be the homestead when filing

    According to the Harris County Appraisal District, in the first quarter of each year, they develop a list of all properties with a prior year homestead exemption which, during that same year, were sold to a new owner. By law, the district will cancel the old exemption as of January 1st of the new year and they mail the new owner an application form. Be sure that you protect your rights by ensuring the district has transferred ownership of your new home and that you have filled out and sent the homestead exemption application in a timely manner. 

    Remember to be aware of scams when it comes to filing your application. There are scams who claim they will file your homestead exemption for you for a fee. This is a scam and you will not have your homestead exemption filed. Your homestead exemption should only cost you as much as a stamp and a few minutes of your time.

    How Else Can I Benefit from Buying before 2021?

    When it comes to home values, Texas is a non disclosure state. This means that if a County Official asks for the current value of your home, you are not required to tell them. Each year, the county will give their best guess on what your home is worth. When the county’s economy thrives, property values can increase by 20%, 25% and even 30% in a year. However, according to the Harris County Appraisal District, Texas voters implemented a “limit” on increases in appraised values for homestead properties in 1997. Therefore, there is now a 10% homestead cap. 

    Appraisal districts are required to appraise properties at their fair market value as of January 1 of each year. You qualify to have your appraised value capped if the property is your primary residence and you have had exemptions in place for two years. This means that the property will be appraised at full market value for the first year that you qualify and receive a homestead exemption. What does this mean if you wait to purchase in 2021? If you choose to wait until 2021 to purchase, you will not be protected by the 10% homestead cap for 2021. Let us give you an example of how this works.

    If you purchase your home by December 31st, 2020, you will be eligible to receive the homestead exemption for 2021 and the 10% cap would take place for the 2021 tax year. Therefore, if 2021’s market value increased from $200,000 to $230,000 in 2022, the appraised value would be limited to a 10% increase. This means your appraised value would be capped at $220,000.

    If you buy your home in 2021, your home will not be capped at the 2021 value. The base year used to calculate a capped value is the first year in which you as the individual property owner qualify for a homestead exemption. Therefore, your cap will be calculated at the value in 2022.

    What if I Cannot Find the Application?

    If you misplace your mailed application or if you do not receive it in the mail, click the links below to access the Homestead Exemption Application in your county. If your county is not listed, applications should be available on the County Appraisal District website. Applications should be mailed to your county’s appraisal district.

    Harris County

    Montgomery County

    Fort Bend County

    Michele Harmon Team always emails out a reminder with more information and links to the applications every January to their buyers from the previous calendar year. If you purchased with Michele Harmon Team, be on the lookout for this helpful reminder in January!

    The Bottom Line

    If you have had plans to purchase a home in 2021, Michele Harmon Team encourages you to consider making your purchase prior to December 31st to ensure you will have more money in your pocket! Otherwise, you will have to wait until 2022 to receive the benefits of a homestead exemption and you will not be protected by the homestead cap until 2023. If you have questions about the buying process or need help finding your dream home, call Michele Harmon Team at 713-818-1330. We can help you secure and negotiate the best home for you and your family!

     

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