Tax Exemptions

PROPERTY “AD VALOREM” TAX EXEMPTION GUIDE

 

It is the time of year again to determine whether your real property/personal property is eligible for an “exemption”, which is essentially an appraisal method. Instead of the property tax being assessed on the market value of the property, the valuation of the property is reduced; therefore, the tax amount is reduced. The eligibility for an exemption is determined by the claimant’s qualifications on January 1 of the tax year. To qualify for most exemptions, you must complete an application with the appraisal district.
Below, is a short summary of a few of the most common property or “ad valorem” tax exemptions.

TAKE ACTION NOW: Please be aware the deadline for applying for an exemption is coming soon. Make a visit to the appraisal district where your property is located soon to make sure you take advantage of these exemptions.

Residence Homestead

Must file a completed application form before May 1st but you do not have to re-apply each year; the exemption applies until the ownership of the property changes or the persons qualifications for the exemption changes.

A family or single adult is entitled to an exemption from tax on $3,000 of the assessed value of his residence homestead. An adult is entitled to exemption from taxation by a school district of $15,000 of the appraised value of the adult’s residence homestead. Additionally, an adult who is disabled or 65 or older is entitled to an exemption from taxation by a school district of $10,000 of the appraised value of his residence homestead.

Note: joint, community, or successive owners may not receive the same exemption for the same residence homestead in the same year. A residence homestead is a structure not to exceed 20 acres that is used as a principal place of residence.

Residence Homestead of 100 Percent or Totally Disabled Veteran

Must file a completed application form before May 1st but you do not have to re-apply each year; the exemption applies until the ownership of the property changes or the persons qualifications for the exemption changes.

A disabled veteran who receives 100 percent disability compensation due to a service-connected disability and a rating of 100 percent disabled, or of individual un-employability, is entitled to an exemption from taxation of the total appraised value of the veteran’s residence homestead.

Disabled veteran means a veteran of the armed services of the United States who is classified as disabled by the Veterans’ Administration or its successor or the branch of the armed services in which the veteran served and whose disability is service-connected.

Note, a surviving spouse of a disabled veteran may continue to use this exemption if certain basic conditions are met. “Surviving spouse” means the individual who was married to a disabled veteran at the time of the veteran’s death.

Limitation of School Tax on Homesteads of Elderly or Disabled

A school district may not increase the total annual amount of ad valorem tax it imposes on the residence homestead of an individual 65 years of age or older or on the residence homestead of an individual who is disabled above the amount of the tax it imposed in the first tax year in which the individual qualified (turned 65 or became disabled) for this exemption.

Tangible Personal Property Not Producing Income

A person is entitled to an exemption from taxation of all tangible personal property, other than manufactured homes, that the person owns and that is not held or used for production of income. This subsection does not exempt from taxation a structure that a person owns which is substantially affixed to real estate and is used or occupied as a residential dwelling.

Income-Producing Tangible Personal Property Having Value of Less Than $500

A person is entitled to an exemption from taxation of the tangible personal property the person owns that is held or used for the production of income if that property has a taxable value of less than $500. All property in each taxing unit will be aggregated to determine taxable value.

Mineral Interest Having Value of Less Than $500

A person is entitled to an exemption from taxation of a mineral interest the person owns if the interest has a taxable value of less than $500. All mineral interests in each taxing unit will be aggregated to determine value.

Family Supplies

A family is entitled to an exemption from taxation of its family supplies for home or farm use.

Farm Products

A producer is entitled to an exemption from taxation of the farm products that he produces and owns. Farm products include livestock, poultry, and timber.

Implements of Husbandry

Machinery and equipment items that are used in the production of farm or ranch products or of timber, regardless of their primary design, are considered to be implements of husbandry and are exempt from ad valorem taxation.

Disabled Veterans

Must file a completed application form before May 1st but you do not have to re-apply each year; the exemption applies until the ownership of the property changes or the persons qualifications for the exemption changes.  A disabled veteran is entitled to an exemption from taxation of a portion of the assessed value of a property the veteran owns and designates in accordance with a certain schedule.

A disabled veteran is entitled to an exemption from taxation of $12,000 of the assessed value of a property the veteran owns and designates if the veteran: (1) is 65 years of age or older and has a disability rating of at least 10 percent; (2) is totally blind in one or both eyes; or (3) has lost the use of one or more limbs.

If a disabled veteran dies, the veteran’s surviving spouse is entitled to the exemption if the spouse remains unmarried.

If an individual dies while on active duty as a member of the armed services of the United States the individual’s surviving spouse is entitled to an exemption from taxation of $5,000 of the assessed value of the property the spouse owns.

An individual may receive an exemption to which he is entitled by this section against only one property.

Motor Vehicles Leased for Personal Use

The owner of a motor vehicle that is subject to a lease is entitled to an exemption from taxation of the vehicle if: (1) the lessee does not hold the vehicle for the production of income; and (2) the vehicle is used primarily for activities that do not involve the production of income.

For purposes of this section, a motor vehicle is presumed to be used primarily for activities that do not involve the production of income if 50 percent or more of the miles the motor vehicle is driven in a year are for non-income producing purposes.

Motor Vehicle Used for Production of Income and for Personal Activities

Must file a completed application form before May 1st but you do not have to re-apply each year; the exemption applies until the ownership of the property changes or the persons qualifications for the exemption changes.

An individual is entitled to an exemption from taxation of one motor vehicle owned by the individual that is used in the course of the individual’s occupation or profession and is also used for personal activities of the owner that do not involve the production of income.

Solar and Wind-Powered Energy Devices

A person is entitled to an exemption from taxation of the amount of appraised value of his property that arises from the installation or construction of a solar or wind-powered energy device that is primarily for production and distribution of energy for on-site use.

Agricultural Use

Texas Const. Art. 8, § 1-d Assessment of lands designated for agricultural use sets out the agricultural use by providing “All land owned by natural persons which is designated for agricultural use … shall be assessed for all tax purposes on the consideration of only those factors relative to such agricultural use. “Agricultural use” means the raising of livestock or growing of crops, fruit, flowers, and other products of the soil under natural conditions as a business venture for profit, which business is the primary occupation and source of income of the owner.”

To qualify for this exemption, each assessment year, the owner must file with the local tax assessor a sworn statement describing the use to which the land is devoted. To qualify, the land must have for at least three successive years immediately preceding the assessment date the land has been devoted exclusively for agricultural use, or have been continuously developed for agriculture during such time.

Open Space Land

Texas Const. Art. 8, § 1-d-1 Open-space land provides “to promote the preservation of open-space land, the legislature shall provide by general law for taxation of open-space land devoted to farm, ranch, or wildlife management purposes on the basis of its productive capacity.”

Section 23.51(1) of the tax code defines “Qualified open-space land” as “land that is currently devoted principally to agricultural use to the degree of intensity generally accepted in the area and that has been devoted principally to agricultural use or to production of timber or forest products for five of the preceding seven years.”

Section 23.51(2) of the tax code defines “Agricultural use” to include but not limited to the following activities: 1) cultivating the soil; 2) producing crops; 3) raising or keeping livestock; 4) harvesting logs or posts for use in constructing or repairing fences, barns, or other agricultural improvements; 5) use of land for wildlife management; and 6) land between 5 and 20 acres that is used to raise or keep bees for pollination, or to produce human food or other products with a commercial value.

Section 23.54 of the tax code provides that the application for this exemption must be filed before May 1st, but that the chief appraiser may extend the filing deadline for not more than 60 days if good cause is shown. If the application is allowed, the land remains eligible for the exemption in subsequent years without a new application unless the ownership of the land changes or its eligibility under this subchapter ends.

Section 23.56 provides certain situations where land is not eligible. These situations include 1) land located inside the corporate limits of an incorporated city (with some exceptions), 2) land owned by a nonresident alien, or 3) land owned by a business entity, and a nonresident alien owns a majority interest in the business entity.