property taxes

Homestead Exemptions and Rollback Taxes

June 8, 2016 by khproperties 1 Comment

If you currently have a homestead exemption on your property or even if you don’t know if you do, you might want to check and consider the consequences if you’re not using the home as your primary residence. If you’re improperly using a homestead exemption, you may be responsible for rollback taxes with your local county if you sell the home (or they catch up with you before then). While the homestead exemption can save you money on your property taxes, it can cost you in the long run if you forget to notify the tax collector when you stop using the home as a primary residence. Knowing whether or not you have a homestead exemption is your first step in the process. You may consult with an expert in property tax services to determine if you qualify for homestead exemption and how you can take advantage of it.

Do You Have a Homestead Exemption?

If you bought a home and are living in it as your primary residence, you should have filed a homestead exemption on your property to save some money on your property taxes. Sometimes, we find that people forget to do it (you have to file in the year that you occupied the home on January 1st – ie, if you buy in November of 2016, you’re not eligible to file for it until 2017 because you have to live in the property on the first day of the year you’re eligible to file) and wind up not taking advantage of this way to lower to your property tax liability. If you don’t know if you’ve filed for it before, you can look up your tax records in most Texas counties. Let’s use Bexar County for example. The website for the Bexar County Appraisal District is bcad.org (you can find your county’s appraisal district by googling “(your county name) appraisal district”), once on the site look for a link to “Property Search” (may be called something similar on different sites) and search for your property. Now that you’ve pulled up your tax record, look for a line that says something to the effect of “exemptions” – on the Bexar County site, it can be found in the first section (Property) on the lower right hand corner labeled “Exemptions” (see image).

The “HS” listed there is the abbreviation for homestead exemption and indicates that this property has one in place.

One of the basic requirements of having a homestead exemption is that you live in the home as your primary residence. But what if you file one, live in the house for awhile and then move on, keeping the home as a rental property or a vacation home? Now that the home is not your primary residence, the homestead exemption doesn’t apply to you…but it doesn’t just automatically go away. The application for exemptions states the following:

DUTY TO NOTIFY: If the chief appraiser grants the exemption(s), you do not need to reapply annually. You must reapply if the chief appraiser requires you to do so, or if you want the exemption to apply to property not listed in this application. You must notify the chief appraiser in writing before May 1 of the year after your right to this exemption ends.

That last line is what we’re after here – you must notify the chief appraiser, in writing, if your right to the homestead exemption no longer applies. As the main condition for the exemption is using the home as your primary residence, you must notify them if you are no longer using it as such.

Rollback Taxes

If the appraisal district suddenly realizes that you have not been living in the home as your primary residence, they can now charge you rollback taxes. The idea is that they’re simply rolling back the clock so that they can collect what wasn’t paid in the past. In the case of a sale, the title company has to draw a tax certificate from the county to ensure that all the taxes are currently paid, so when they do that, the county appraisal district will take a look at the property and can decide that they didn’t collect everything that was due to them and make those taxes due immediately. Being hit with a sudden charge of rollback taxes on your closing statement can be unexpected and take away from any money you might have expected to walk away from the sale with. The tax man will be happy, but a homeowner who suddenly finds themselves shelling out more than they were prepared for can find this rather frustrating.

The best way to keep this from happening? Notify your appraisal district of any changes in your residency status on a home right away. This way, there will be no tax surprises when selling your home.

image courtesy of Alan Cleaver

Homestead Tax Exemption for 2016

January 7, 2016 by khproperties Leave a Comment

It’s time to file for your homestead tax exemption. If you’ve already filed, you don’t need to file for it again, but if you bought a home in 2015 and lived in the house on January 1, 2016, you’ll want to get that homestead tax exemption! You have until April 30th to apply for your exemption, but it’s best to get it out of the way and be done with it. You must use your home as your primary residence and cannot claim multiple exemptions on different properties – you only get one homestead. In order to claim your homestead, you’ll need to fill out an Application for Residential Homestead Exemption (PDF) and file it with your local appraisal district. Make sure you have updated your driver’s license with your new address as well, as you’ll need a copy of that to file along with the application. Once you have the form completed and all the necessary items (see the form for full details), you’ll need to send everything off to your local appraisal district (done by county here in Texas). If you need to look up where to send it, you can visit the Texas Comptroller’s website for the appraisal district directory. Once there, just locate your county and click on the link to find all the mailing information for your local appraisal district.

Once you have a homestead tax exemption, it gives you a $25,000 exemption (they raised it from $15,000 in 2015) on the assessed value of your home. Let’s say the tax assessed value of your home is $200,000. With a homestead tax exemption, you will be taxed on the home as if it were assessed at $175,000 ($200,000 minus the $25,000 exemption).

If you receive letters in the mail telling you that they will file this claim for you, throw them in the trash! Filing your homestead exemption is free and you should not pay anyone to do it for you. Many of the letters you’ll see in the mail will look official and make it look like you need to pay someone in order to claim the exemption. This is simply not true. File the forms yourself (they’re not even that hard to fill out) and file for free. If you need some assistance, contact your real estate agent and they’ll be happy to help.

There are also some other exemptions you may be eligible for (and they are all applied for on the same application): disabled person exemption, age 65 or older exemption (also may apply to a surviving spouse), 100% disabled veterans exemption (also may apply to a surviving spouse), donated residence homestead of partially disabled veteran exemption (also may apply to a surviving spouse), and surviving spouse of member of armed forces killed in action exemption. See the application for more details on each of these.

image courtesy of psyberartist

Using an Escrow Account for Insurance and Property Taxes

December 18, 2013 by khproperties Leave a Comment

12818 Falcon Ledge - San Antonio 78259

Should I use an escrow account?

My lender insisted that I put money into an escrow account as part of the mortgage agreement. Can he do that?

Yes – if you financed your home with a government loan (ie, USDA, FHA, or VA), then an escrow account is required. No – if you purchased your home with 20% or more down using a conventional loan, in that case, it’s your decision. Additionally, if you refinanced your home loan and have 20% or more equity in your home then it’s an option and not a requirement.

Why would the lender still try and persuade me to have an escrow account if I put 20% down using a conventional loan? It’s my money to pay my property taxes and my homeowners insurance.

While this is true, mortgage lenders want to manage and mitigate their risk. Knowing that your home is insured and that it can’t be seized for back taxes gives them more confidence in using it as collateral for the mortgage loan. Specifically, city, county, and state taxing officials can usurp the first lien holder for unpaid taxes. Consequently, also as mentioned by accidental death & dismemberment claim, many mortgage lenders don’t want to leave it up to you to pay your property taxes and hazard insurance. Thus, mortgage companies will generally establish escrow accounts that have a two to three month surplus to pay insurance and taxes on an annual basis.

So how do they establish a cushion for my homeowners insurance and property taxes in my escrow account?

At closing you will normally pay the first full year of your homeowners insurance. Subsequently, you will add three months or 1/4 of the next year’s insurance payments to your escrow account. Why? In order to compensate for the lag time between closing and when your first mortgage payment is due. For example if you closed on June 15th your first payment is generally not due until the 15th of August. Consequently, your business insurance in Gresham, OR company will bill your mortgage company for the next full year payment the following May. If you did not add the three month cushion you would only have around ten months of premiums in your escrow account when your second year payment became due.

So what about property taxes?

The seller will pay taxes from January 1st through the day you close (in the scenario above it would be through the closing date of June 15th). Thus, he’s paying about four and half months of property taxes for the time he lived in the home. As mentioned before, your first payment is not due until August 15th. Therefore, you are paying about four and a half months to fund the account, for a total of about nine months of property tax payments. However, you will have to pay the entire tax bill come December. Therefore, your lender will calculate a portion of money to be put into your escrow account to compensate. It’s not an exact science – it’s a subjective assessment. His calculations will also take into account potential tax increase or decrease adjustments. Escrow accounts are usually analyzed yearly between January and March, sometimes you get money back and sometimes you have to pay a little more.

Are there any drawbacks to using an escrow account?

Once money goes into an escrow account, it generally stops working for you as most accounts don’t earn interest. In some states, escrow accounts only earn interest if the borrower requests it and meets various legal conditions. If you can keep your payments minimal, you can put more of your money into interest-bearing investments.

As with anything the responsibility is on you to monitor your escrow account. Your lender has to provide you with an annual statement showing how the money in the escrow account has been spent. It’s always recommended that you read this and confirm that your account is the right size and that your lender has calculated the payments properly. You should also check with your lender every year to make sure the payments have actually been made; there have been cases where the lender failed and the homeowners only found out when they were notified their home would be sold for back taxes.

“Anticipate the difficult by managing the easy. – Lao Tzu“

End of the Year: Time to Start Gathering Your Paperwork

December 10, 2013 by khproperties Leave a Comment

At the End of the Year, Time to Start Thinking Ahead

If you bought a home in 2013, now, at the end of the year, is a great time to start gathering the paperwork you’ll need in the first few months of 2014. Some of this paperwork will help you save money in the future and everyone likes to save money! Whether it’s for income tax or property tax purposes, now is a great time to prepare the paperwork and know where you put it, since often these things get set aside and forgotten in boxes in the attic. Don’t wait for the last minute to get your paperwork sorted.

HUD-1 Settlement Sheet – This document shows the breakdown of all items paid at your closing. If you itemize your deductions (and as a homeowner you should), you may be eligible to deduct any mortgage interest and certain property taxes that you paid at closing. As always, when it comes to taxes, please consult with a qualified tax specialist to determine what you can and can’t deduct.

Homestead Exemption – While you can’t file your Homestead Exemption form until January 1st, it might be a good idea to download the form and put it in a safe place that you can find easily. If you bought the home in 2013 and are occupying the home on January 1, 2014, you may be eligible to file a Homestead Exemption for your property taxes. You can download the form here.

Other Paperwork Tips

It’s always a good idea to have all your homeowner paperwork handy. More often than not, we hear homeowners say they “think they have that somewhere,” but often they can’t remember where they put it. If you have a filing cabinet at home – use it! Some of the paperwork you should always keep track of:

HUD-1 Settlement Statement – As noted previously, this document provides a breakdown of all of the charges accrued at the closing. It can be very useful for tax purposes, but also gives you a great breakdown of the costs associated with buying your home. If you ever need to sell, you can reference this document to see what the “true” cost of buying your home was.

Survey – Homeowners lose this document all the time and it’s a shame. Keeping it safe and knowing where it is can save you about $300 if you need to sell your home. Often you can reuse your previous survey (providing you haven’t made major changes to the property) when you sell your home.

Homeowner’s Association Documents – They aren’t the most entertaining read you’ll ever have, but they do serve a purpose. They outline the rules and regulations that you’ll need to follow as a homeowner in the community. You will also need these if you ever decide to rent your home, as you are required by the Texas Property Code to give your new tenants a copy so that they know what rules they’ll have to follow.

Title Commitment/Title Insurance – If there is ever a question of proper ownership of a property, knowing where your title insurance is and who to call is pretty important! While title companies work to ensure that you are the true owner when you buy a home, there are times when mistakes are made, which is why title insurance exists. If a claim were made against your property, you would certainly want to call your insurer to get them on the case.

Hopefully, you know where all of your homeownership documents are. It’s always a good idea to keep a file set up and ready to go, should you ever need any info from it. You can also ask your agent for copies of most documents, so keep their card handy!

image courtesy of Cast a Line

Bexar County Appraisal District (BCAD) and Incorrect Information

March 1, 2013 by khproperties 1 Comment

Mistakes in Bexar County tax records.

Mistakes in the Bexar County Appraisal District’s records are not all that uncommon. Quite often while looking at public tax data, we find incorrect information. These mistakes could lead to trouble down the road for homeowners if they chose to sell their homes, particularly if they don’t notice them in a timely fashion. In Bexar County, our property tax (also know as ad valorem tax) data is available to the public via the Bexar Appraisal District website and your San Antonio real estate agent uses it to help determine many things (one of which should not be the fair market value of your home). Check out these two real life examples of what can happen with incorrect information in Bexar County Appraisal District (BCAD).

Case #1: Who owns the home?

In the first example of incorrect information, the homeowner is improperly listed. The Bexar County Appraisal District records show that the property transferred from the seller to the buyer and then back to the seller once again a few days later. The BCAD records clearly show the former seller as the owner of the home.

Solution? The homeowners will have to contact the Bexar County Appraisal District and get them to correct the owner’s information. Unfortunately, data entry is not top priority on the tax man’s list. We often see cases of bad data entry in the appraisal district’s property tax information.

On a side note, BCAD had also sent someone out to this client’s home and took some measurements. Bexar County has been increasing their research on homes recently; looking for mistakes, miscalculations, and home improvements or additions. The better their data collection, the more their tax appraised valuations will be inline with the true value of the home (ie, there are some homes that haven’t been checked in so long, their taxes are way out of line with what they should be).

Case #2: That doesn’t describe my home.

In the second example, the home described in the Bexar County Appraisal District does not match the home’s details. The client’s home is listed with the wrong amount of bedrooms and bathrooms, as well as being almost 1,000 square feet off the mark. As we base part of our pricing and determination of fair market value on square footage and recently sold home comparisons, this can make a huge difference – particularly to the buyer’s agent when they are running comps to see what they believe the value of the home to be. Imagine if homes in your area are selling for $80/square foot and data publicly available shows your home is 1,000 square feet less than it truly is. That’s $80,000 in value that would be missing from your home because of a data entry area.

Solution? We would use a form called a “Notice of Information From Other Sources” to show that the data is incorrect and we have supporting evidence of the correct information. We researched the problem and it looks like the builder initially entered the wrong information into the MLS and that information spread to BCAD. We will provide builder plans and other information to show that the home is indeed almost 1,000 square feet larger than the tax valuation shows it is.

Check your information on BCAD.

You should check your information and tax valuation on the Bexar County Appraisal District’s website at least once a year to be sure that the data is correct, as well as looking at any fluctuations in the tax valuation of your home. As Texas is a non-disclosure state, these fluctuations can at times seem arbitrary and flat out wrong. You have a right to protest your property taxes in San Antonio and Bexar County and it’s something a lot of homeowners don’t know.

image courtesy of Corey Leopold

Get Your Property Tax Exemptions Here

December 28, 2011 by khproperties 3 Comments

We are constantly updated homestead tax exemption information on our site – you may want to head over to the post “Homestead Tax Exemption for 2016” for the most up to date information. If you have purchased a new home in 2011, first off – congratulations! The joys of home ownership can be plentiful. While a home is a huge investment, there are ways that you can save yourself a bit of money if you know how. One of the most popular, yet surprisingly under-utilized methods of cutting back on expenses is to make sure you have filed for a property tax exemption, in particular the homestead tax exemption. The various exemptions are quite easy to apply for in Texas and while they require a bit of prep work, they shouldn’t take you too long to complete.

The most common of these exemptions is the homestead exemption, which may qualify you for up to $15,000 (the value on the homestead tax exemption was raised to $25,000 in 2015) on your school taxes. In order to qualify for this exemption, you must:

Own a home as of January 1
Use that home as a primary residence
Not claim another property as your homestead
Complete this form and submit to the Bexar County Appraisal District before April 30

Another popular exemption is the over 65 exemption , which can freeze your school taxes, provided no new improvements are made to your house. To be eligible you must:

Be over 65 years old (or turn 65 in the current tax year)
Own your residence and use it as your primary home
Complete a form and submit to the Bexar County Appraisal District before April 30

According to SSD social security disability law firm, if you are 100% disabled and unable to work, you may apply for a disability exemption with a letter from the Social Security Administration and receive up to $10,000 in value exemptions to be applied towards school taxes. (If your home were valued through the appraisal district at $250,000, the school tax rate would only be applied on a value of $240,000). Other exemptions are available in conjunction with the Veterans Affairs office for veterans with at least 10% disability. Exemption benefits will depend on the percentage of disability you have, but they will apply to all tax units (not just school taxes).

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This year (2011) the Bexar County Appraisal District has enacted 2 new requirements for the filing of exemptions. When filing, you must now include:

A copy of your driver’s license or state-issued ID card with personalised lanyards
A copy of your vehicle registration receipt (if you do not own a vehicle, you will have to sign an affidavit stating that fact, and you may include a utility bill in its place)

Any agencies who may contact you offering to file the documentation on your behalf, for a fee, are fraudulent. Filing of these exemptions is completely free! As always, if you have questions, be sure to contact your favorite real estate expert for assistance.

image courtesy of Images_of_Money