A rental has no homestead exemption
The homestead exemption applies only to your principal residence. A home you rent to someone else does not qualify, and neither do the add-ons that ride on it, such as the over-65 and disability exemptions and their school tax ceiling.
Losing the homestead does two things. First, the exemption amounts come off, so more of the home's value is taxed by the school district and any other taxing unit that offered an exemption. Second, the homestead cap goes away. While a home is your homestead, its taxable value cannot rise more than 10 percent a year, even if the market value jumps. Once it is no longer a homestead, the taxable value can move up to the full appraised value. Owners who lived in a home for many years are often surprised by the size of that jump.
Texas has also placed temporary limits on value increases for some non-homestead properties in recent years. Whether one applies to your home, and for which year, is something to confirm with your appraisal district rather than assume.
What to do when you move out and rent the home
Exemptions in Texas are based on how a home is used on January 1. If you move out during the year, the exemption generally stays for that tax year, and the change shows up the next January. You are expected to tell the appraisal district in writing when a home no longer qualifies. Do it promptly: if the district finds out later, it can go back and bill the taxes that should have been paid, with interest.
If you buy a new home and make it your homestead, file for the exemption there. You can only have one homestead at a time.
- Notify your county's appraisal district that the old home is no longer your homestead.
- Update your mailing address with the appraisal district and the tax office, so notices and bills reach you.
- If your mortgage escrows taxes, expect the escrow payment to rise after the next bill. Ask your lender for an escrow analysis rather than waiting for a shortage.
- Budget for the higher tax in your rent analysis. The rent you set should cover it.
Which appraisal district handles your home
Each county has its own appraisal district that sets values, and a tax office that sends the bills. Homes in San Antonio and most of the city's suburbs fall under the Bexar Appraisal District. Nearby counties have their own: Comal Appraisal District for most of New Braunfels and Canyon Lake, Guadalupe Appraisal District for Seguin, Schertz and Cibolo, Kendall Appraisal District for Boerne, and Medina, Wilson and Atascosa counties each have one too. Some cities straddle a county line, so check the district on your last tax bill.
Appraisal notices and the yearly calendar
- January 1: the home's value and its use (homestead or not) are fixed for that tax year.
- Spring, usually April or May: the appraisal district mails a notice of appraised value. Many districts also post it in an online account.
- Protest deadline: usually May 15, or 30 days after the notice was delivered, whichever is later. The notice states the date.
- Summer: informal reviews and Appraisal Review Board hearings.
- Fall: taxing units adopt their rates, and bills go out around October.
- January 31: taxes are due. They become delinquent February 1 and penalties and interest begin.
Protesting the value
Every owner has the right to protest. On a rental, where every dollar of tax comes out of the return, it is worth checking the value every year. Most districts in the area accept protests online.
Protests are won with evidence. The strongest is recent sales of similar nearby homes that sold for less than your appraised value. Condition matters too: photos and contractor estimates for foundation movement, an old roof, or an AC near the end of its life can support a lower value. Rothrock's quarterly inspection photos and repair invoices are useful here.
Most protests settle at an informal meeting with an appraiser. If not, you present your case to the Appraisal Review Board, which is independent of the appraisers. Some owners hire a property tax consultant who works for a share of the savings; that is a personal choice.
Taxes as a rental expense
In general, property taxes on a rental home are an ordinary expense of the rental business, reported against rental income on your federal return, rather than as a personal itemized deduction. In the year a home converts from residence to rental, the taxes are usually split between the personal and rental periods.
This is general information, not tax advice. How it applies depends on your situation, so work with a CPA or tax preparer. Your Rothrock owner statements show rent collected and every expense with its invoice, and you receive a 1099 at year end, which makes that conversation easier.
Questions
Can I keep my homestead exemption if I rent out my house in Texas?
No. The homestead exemption is only for your principal residence. If you move out during the year, it generally stays through that tax year, but you should notify the appraisal district in writing that the home no longer qualifies.
Why did my property taxes go up so much after I rented my house?
Two things usually happen at once. The homestead exemption comes off, and the 10 percent yearly cap on taxable value ends, so the taxable value can rise to the full appraised value in one year.
When is the deadline to protest property taxes in Bexar County?
The deadline is usually May 15, or 30 days after your appraisal notice was delivered, whichever is later. The date is printed on the notice from the Bexar Appraisal District.
Are property taxes on a rental deductible?
In general, property taxes on a rental home are treated as a rental expense against rental income. Rules depend on your situation, so confirm with a tax professional.
What happens if I pay property taxes late in Texas?
Taxes are due by January 31. Starting February 1 they are delinquent and penalties and interest are added, growing each month. If your lender escrows taxes, it pays the bill, but check that the payment posted.
General information about Texas rules, not legal advice. For a specific situation, speak to a Texas attorney.