Owning a home in Texas isn’t just about putting down roots and building memories. It also comes with some pretty solid tax perks. Whether you’re living in a high-rise condo in downtown Dallas or settling on a few quiet acres in the piney woods of deep East Texas, understanding the tax benefits of homeownership can help you keep more money in your pocket.
Here’s a breakdown of the top tax advantages homeowners in Texas can enjoy.
The Homestead Exemption
This one’s a big deal in Texas. If your home is your primary residence, you can apply for the homestead exemption, which reduces the taxable value of your home.
- Most homeowners can knock $40,000 off the taxable value of their home when calculating school district property taxes.
- Many counties, cities, and special districts offer additional exemptions, especially for seniors, veterans, and disabled individuals.
Tip: You must own and occupy the home as of January 1 to qualify for the homestead exemption. Don’t forget to file the appropriate paperwork with your county appraisal district!
Itemized Deductions
When filing your taxes, you can take the standard deduction or choose to itemize. Itemizing means listing out specific expenses—like mortgage interest, property taxes, and charitable donations—that may add up to more than the standard deduction ($13,850 for individuals or $27,700 for couples in 2024).
For many Texas homeowners, especially those paying a mortgage and property taxes, itemizing can reduce taxable income more than the flat standard deduction. It takes a bit more effort, but if your expenses are high enough, it can lower your tax bill and help you keep more of your hard-earned money.
Mortgage Interest Deduction
If you itemize your deductions, you may be able to deduct the interest paid on your mortgage—especially helpful during those first few years when interest makes up a big chunk of your payment.
- You can typically deduct interest on up to $750,000 of mortgage debt (depending on your filing status and when the loan was taken out).
- This applies to primary homes and sometimes second homes as well.
Property Tax Deduction
While Texas doesn’t have a state income tax, we do pay property taxes. The good news? You may be able to deduct up to $10,000 of those property taxes on your federal return (or $5,000 if married and filing separately) if you itemize deductions.
Tip: This deduction is especially helpful in areas where property values—and tax bills—have been on the rise.
Energy Efficiency Upgrades
Thinking about installing solar panels or upgrading your HVAC system? The federal government offers tax credits for certain energy-efficient home improvements. While not unique to Texas, these credits can stack up to big savings over time.
Tip: You could qualify for credits for solar, insulation, energy-efficient windows, and more. Check out the IRS website for the most up-to-date information on the Energy Efficient Home Improvement Credit.
Capital Gains Exclusion When You Sell
Here in Texas, homes tend to hold their value—and sometimes grow quite a bit over time. If you sell your home and make a profit, you can exclude up to $250,000 of the gain from your taxable income (or $500,000 if married and filing jointly), as long as:
- It’s your primary residence
- You’ve owned and lived in it for at least two of the past five years
That’s a big help when it comes time to sell and move on to your next adventure.
Final Thoughts for Texas Homeowners
From downtown Houston to the dusty backroads of El Paso County, Texas homeowners have access to real savings at tax time.
When you’re ready to take advantage of these savings, The Edwards Team is here to help you make your dream of homeownership a reality. Tyler, TX realtors are your local experts when it comes to finding the best homes for sale in East Texas. Check out our listings. Then, contact us to schedule a showing.
