Homestead Exemption in Texas: How to Protect Your Home from Creditors

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Table of Contents
This article will help you answer these questions:
Special tax benefits to the Texas homestead

This article will help you answer these questions:

1. Where do homestead laws even come from?

2. What is a Texas homestead?

3. What is the difference between an urban and a rural homestead?

4. What is the difference between family and individual homesteads?

5. How do I establish a Texas homestead?

6. How do I file a homestead affidavit?

7. Should I file an appraisal tax exemption?

8. How long does a Texas homestead last?

9. Does a homestead exemption protect personal property?

10. Are there exceptions to the homestead protection?

11. Are there any tax benefits to having a homestead in Texas?

It’s said that a man’s home is his castle, a line widely attributed to the famed English legal scholar Sir Edward Coke in the 17th Century. No place in America is that line more true than the state of Texas. Protections for a man’s home, or homestead, date back to the earliest days of Texas’s history and helped form the foundation of the state. 

In Texas, the homestead is the family home. Under Texas law, starting with the state constitution, the homestead is the foundation of a legal shield from creditors and forms the basis of a right to live there — have occupancy — against nearly all comers. That fundamental right blossoms out to found special protections, privileges, and benefits creating  some of the strongest laws in the United States — all aimed at protecting the Texas homestead. 

Texas has long protected the homestead, going back to the earliest days of 1829 when Stephen F. Austin called for a moratorium on the “collection of the colonists’ foreign debts.” These types of protections continued when Texas formed its first state constitution in 1845, which spelled out a unique provision of the time that, “made exempt from forced sale any family homestead, not to exceed 200 acres of land or city property not exceeding $2,000 in value; the owner, if a married man, could not sell or trade the homestead except with the consent of his wife.” 

While Texas has had many updated constitutions since 1845, the general principle remains strong that state law exists to protect the homestead — the family home — from creditors and others.

This article aims to walk you through Texas homestead protection laws. If you are a current Texas homeowner, a potential homeowner, or just curious about laws on the topic, this article will explain the important points you need to know about these laws and what options are available to Texas homeowners. It should be noted these are state-level protections that don’t apply under federal law. For example, if the creditor is the Internal Revenue Service (IRS), Texas homestead laws provide no protection.

Modern homestead protection laws 

The foundation for all homestead protection laws in Texas begins with the state constitution which references the word “homestead” a whopping ninety-three times. Article 16 – General Provisions; Sections 50 – 52 of the Texas Constitution all deal with the Texas homestead, its protections, and various applicable exemptions. Section 50 is titled, “PROTECTION OF HOMESTEAD FROM FORCED OR UNAUTHORIZED SALE; EXCEPTIONS; REQUIREMENTS FOR MORTGAGE LOANS AND OTHER OBLIGATIONS SECURED BY HOMESTEAD.”

The first sentence of Section 50; Subsection (a) describes the general principle underlying all Texas law regarding the homestead: “The homestead of a family, or of a single adult person, shall be, and is hereby protected from forced sale, for the payment of all debts except for…” We will talk more about the exemptions — and there are many — in a bit, but the overarching point is a family’s home is presumed protected from forced sale unless you are in one of the exempted categories.

We will work through definitions and exemptions related to this unique rule, but remember everything is building off a fundamental protection: The home is presumed to have a state authorized, statutory shield around it that protects a homeowner’s “castle.”

How does Texas law define a homestead? 

Before going any further in the constitutional text, we should probably pause for a moment to answer: what is a homestead? It’s fine enough to talk about all the broad protections afforded to a homestead, but the law is all about definitions and categories and figuring out whether or not the facts match those descriptions.

In order to know the definition, we need to jump from the state constitution to the Texas Property Codes. Section 41 of the Texas Property Codes is our first destination. It goes through the process of defining what is and isn’t a homestead.

Section 41.002 defines the homestead in two different ways: urban and rural.

The determination of whether a homestead is urban or rural is a fact-driven analysis that varies by person and property and has been the subject of extensive litigation. If you’re unsure after looking at the statutory requirements whether or not you qualify as a rural or urban homestead, it’s best to consult a Texas attorney on the matter.

It’s worth noting these definitions, rural or urban, apply to all homesteads in the state of Texas at any time or place. Subsection (d) of 41.002 states, “The definition of a homestead as provided in this section applies to all homesteads in this state whenever created.”

The Urban Texas Homestead 

Texas Code defines the urban homestead in Section 41.002; subsections (a) and (c).

(a) If used for the purposes of an urban home or as both an urban home and a place to exercise a calling or business, the homestead of a family or a single, adult person, not otherwise entitled to a homestead, shall consist of not more than 10 acres of land which may be in one or more contiguous lots, together with any improvements thereon.

(c) A homestead is considered to be urban if, at the time the designation is made, the property is:

(1) located within the limits of a municipality or its extraterritorial jurisdiction or a platted subdivision; and

(2) served by police protection, paid or volunteer fire protection, and at least three of the following services provided by a municipality or under contract to a municipality:

(A) electric;

(B) natural gas;

(C) sewer;

(D) storm sewer; and

(E) water.

It’s worth noting some important words and distinctions in the statutory description. An urban homestead can include either a residence or a home business (“exercise a calling or business”). The urban homestead is limited to a maximum of 10 acres of land, which must be contiguous plots — this means they must be a continuous 10 acres and not separate plots (this differs from the rural homestead requirements).

Also in section (c), an urban homestead must meet both of the definitions described. An urban homestead must be within a municipality or under contract with one, and it must receive three of the six listed services: electricity, natural gas, sewer, storm sewer, or water. Both (1) and (2) must have their factors satisfied to fall under an urban homestead definition.

If an urban homestead exists and has more than the 10 acres listed in the statutory protections, the acreage above the protected max does not get the same homestead protection benefits.

The Rural Texas Homestead 

Texas Code defines the rural homestead in Section 41.002; subsection (b).

(b) If used for the purposes of a rural home, the homestead shall consist of:

(1) for a family, not more than 200 acres, which may be in one or more parcels, with the improvements thereon; or

(2) for a single, adult person, not otherwise entitled to a homestead, not more than 100 acres, which may be in one or more parcels, with the improvements thereon.

It’s probably obvious to you, but the difference between rural and urban is the rural homestead can contain many more acres than the urban homestead. The max protection for a rural homestead is 200 acres but, unlike the urban homestead, that land does not have to be one contiguous plot of land. The statutes clearly aimed at accommodating the large agricultural community that has always been present in Texas. Farmers often have plots of land scattered around; the law will protect up to 200 of those acres of land if it’s a family. It the owner is a single adult, the law will protect up to 100 acres for a single adult as a homestead.

There is not, however, a list of requirements a rural homestead must meet. Instead,  if property fails to meet the requirements of an urban homestead, it defaults to a potential rural homestead. Once a rural homestead is established, “it remains a rural homestead, even if the surrounding area becomes urban.”

Family versus individual homesteads 

In the statutory definitions, you’ll note a distinction is made between a family living on a homestead and an individual. While Texas law has changed over time to include individuals and families, it’s still important to note the legal definitions. If you can’t qualify as a family homestead, the law defaults back to the status of an individual, which matters considerably more for rural homestead protection because a family has access to more land.

Both individuals and families can only claim one home as a homestead. If a family unit is established, it cannot have multiple homesteads. And as for the definition of a family, it’s pretty flexible in Texas, as the people do not have to be related, but, “the head of household is legally or morally required to support a least one other family member.”

How to establish a Texas homestead 

All of the above descriptions are fine as an academic matter, but you are probably wondering how you can establish a homestead in order to take advantage of Texas law? Broadly speaking, there are three requirements to establish a homestead. Homestead rights commence when the homeowner does these three things:

  1. obtains the right to possess the land,

  2. uses the property as a homestead, and

  3. intends to claim the land as a home.

The first point is fairly straight forward: there must be a transfer of real estate from one party to another. You cannot claim homestead protection if you don’t have a real property interest in that piece of real estate. Transfers happen in a variety of ways. It may be as simple as a traditional real estate transaction between two parties or it may be a conveyance through probate court where the heirs to an estate receive possession.

The essential point is you must have a right to possess the land and a right to occupy it. Homestead protection laws are directed at protecting a person’s primary place of residence. If creditors are pursuing a home or real estate, it is up to the debtor to establish a homestead.

Filing a homestead affidavit 

While not an automatic guarantee, it is helpful to make a voluntary designation of the property as being a homestead and filing with the local clerk. The Texas Property Code Sec. 41.005, entitled VOLUNTARY DESIGNATION OF HOMESTEAD, Subsection (c) lays out requirements for filing an affidavit that designates property or portions of real estate as a homestead, for either rural or urban purposes:

(c) Except as provided by Subsection (e) or Subchapter B, to designate property as a homestead, a person or persons, as applicable, must make the designation in an instrument that is signed and acknowledged or proved in the manner required for the recording of other instruments. The person or persons must file the designation with the county clerk of the county in which all or part of the property is located. The clerk shall record the designation in the county deed records. The designation must contain:

(1) a description sufficient to identify the property designated;

(2) a statement by the person or persons who executed the instrument that the property is designated as the homestead of the person’s family or as the homestead of a single adult person not otherwise entitled to a homestead;

(3) the name of the current record title holder of the property; and

(4) for a rural homestead, the number of acres designated and, if there is more than one survey, the number of acres in each.

This is a very important statute for homestead owners. If you own more than the 200 acres as a family or the 100 acres as an individual and you change your mind about what portions of your land make up your homestead, you should make appropriate changes to the affidavit and then file it.

Subsection (d) explains this process and encourages those seeking homestead protection to update their records:

(d) person or persons, as applicable, may change the boundaries of a homestead designated under Subsection (c) by executing and recording an instrument in the manner required for a voluntary designation under that subsection. A change under this subsection does not impair rights acquired by a party before the change.

Filing the homestead affidavit is a helpful way for a person who owns multiple properties that could be considered a homestead to designate which one is the protected homestead.

The affidavit is still not a guarantee of the homestead protections because you have to meet the basic requirements listed at the beginning of this section: 1) obtaining the right to possess, 2) using the property as a homestead, and 3) intent to claim the land as a home. Filing the affidavit while failing the basic steps of establishing a homestead will not shield you in future litigation should discrepancies arise between parties.

Filing an appraisal tax exemption 

Another method of establishing a homestead claim on your property is to file an “Application for Residential Homestead Exemption.” The Comptroller for the state of Texas provides a helpful description of this form:

You may file an Application for Residential Homestead Exemption with your appraisal district for the $25,000 homestead exemption up to two years after the taxes on the homestead are due. Once you receive the exemption, you do not need to reapply unless the chief appraiser sends you a new application. In that case, you must file the new application. If you should move or your qualification ends, you must inform the appraisal district in writing before the next May 1st.

The Texas Comptroller’s office offers a free PDF version of the form you can fill out here. After the form is completed, you should file it with a local appraisal office. An updated list of approved state offices on the Comptrollers website can be found here.

Even with this tax filing, it’s important to remember the legal requirements of owning and using the property as a homestead must be met or, at a minimum, having intent to take those actions.

An established homestead continues nonstop 

The overarching point is to signal to the state of Texas, either through official notices of an affidavit, tax filings, or through other actions that the real estate in question is your homestead. The Texas Court of Appeals described the importance of getting a homestead designation in a 2003 case, Wilcox v. Marriott:

To establish homestead rights, a party must show “overt acts of homestead usage, and intention on the part of the owner to claim the property as homestead.” Once property has been dedicated as homestead, it can only lose such designation by abandonment, alienation, or death. After the party has established the homestead character of the property, the burden shifts to the creditor, or in this case the Appellants, to disprove the continued existence of the homestead. In other words, a homestead is presumed to exist “until its termination is proved.” (citations removed)

Once a homestead status is locked down, it continues until the property is abandoned, alienated, or the owners of the property die. This feature of continuation is one of the reasons Texas’s law is so powerful. Once the criteria are met, the shield doesn’t expire after some arbitrary amount of time.

Additionally, once you have filed the affidavit, have filed for tax exemptions, or, more importantly, are legally living on and utilizing the property as your homestead, Texas homestead protections attach.

Personal property protected on the homestead

The homestead exemption itself focuses on real estate and real property so things like houseboats don’t apply under it. However, that doesn’t mean personal property held on a homestead or other property is free game for creditors. Texas provides protections for certain personal property which can be important for operating a homestead.

Chapter 42 of the Texas Property Code provides an itemized list of personal property the Texas Legislature has deemed important enough to be exempt from creditors, barring certain caveats. Section 42.001 lays out the requirements for personal property:

(a) Personal property, as described in Section 42.002, is exempt from garnishment, attachment, execution, or other seizure if:

(1) the property is provided for a family and has an aggregate fair market value of not more than $100,000, exclusive of the amount of any liens, security interests, or other charges encumbering the property; or

(2) the property is owned by a single adult, who is not a member of a family, and has an aggregate fair market value of not more than $50,000, exclusive of the amount of any liens, security interests, or other charges encumbering the property.

Like the homestead protections, Texas has different levels of protection for family and individuals. The same definitions of family and individual from the homestead section apply to personal property as well. There are four items that Texas lists as personal property that are not included in the above caps of $100,000 for families, and $50,000 for individuals. Section 42.001, subsection (b) provides the details:

(b) The following personal property is exempt from seizure and is not included in the aggregate limitations prescribed by Subsection (a):

(1) current wages for personal services, except for the enforcement of court-ordered child support payments;

(2) professionally prescribed health aids of a debtor or a dependent of a debtor;

(3) alimony, support, or separate maintenance received or to be received by the debtor for the support of the debtor or a dependent of the debtor; and

(4) a religious bible or other book containing sacred writings of a religion that is seized by a creditor other than a lessor of real property who is exercising the lessor’s contractual or statutory right to seize personal property after a tenant breaches a lease agreement for or abandons the real property.

Section 42.002 lists the personal property that is exempt from garnishment, attachment, execution, or other seizure if it meets the aggregate limitations of $100,000 for families and $50,000 for individuals. The property included is as follows:

(a) The following personal property is exempt under Section 42.001(a):

(1) home furnishings, including family heirlooms;

(2) provisions for consumption;

(3) farming or ranching vehicles and implements;

(4) tools, equipment, books, and apparatus, including boats and motor vehicles used in a trade or profession;

(5) wearing apparel;

(6) jewelry not to exceed 25 percent of the aggregate limitations prescribed by Section 42.001(a);

(7) two firearms;

(8) athletic and sporting equipment, including bicycles;

(9) a two-wheeled, three-wheeled, or four-wheeled motor vehicle for each member of a family or single adult who holds a driver’s license or who does not hold a driver’s license but who relies on another person to operate the vehicle for the benefit of the nonlicensed person;

(10) the following animals and forage on hand for their consumption: (A) two horses, mules, or donkeys and a saddle, blanket, and bridle for each; (B) 12 head of cattle; (C) 60 head of other types of livestock; and (D) 120 fowl; and

(11) household pets.

A caveat to this list is that if the value of the items in the list exceeds the aggregate dollar amounts listed ($100,000 for families and $50,000 for individuals) the excess is still subject to a levy. The statute states:

(a) If the number or amount of a type of personal property owned by a debtor exceeds the exemption allowed by Section 42.002 and the debtor can be found in the county where the property is located, the officer making a levy on the property shall ask the debtor to designate the personal property to be levied on. If the debtor cannot be found in the county or the debtor fails to make a designation within a reasonable time after the officer’s request, the officer shall make the designation.

As a practical matter, some attorneys suggest this rarely happens. In any event, it is listed as an issue and should be taken into account in any situation involving creditors.

Six Exceptions to the Texas Homestead 

At this point, we should return to the Constitutional definition we started with at the top. Texas law is incredibly beneficial and deferential towards a person with a homestead interest. Section 50; Subsection (a) of the Texas constitution says, “The homestead of a family, or of a single adult person, shall be, and is hereby protected from forced sale, for the payment of all debts except for…”

While that is the general rule, there are exceptions. Broadly speaking, the Texas constitution includes six exceptions to the homestead protection presumption. The homestead is protected from forced sale for the payment of all debts unless it involves:

  1. Purchase money

  2. Ad valorem taxes

  3. Owelty partition orders or agreements

  4. Refinanced liens against the homestead

  5. Liens used for new construction improvements 

  6. Credit extensions

Unless you are an expert on “owelty partitions,” it may be helpful to discuss a few of these exceptions.

Purchase money is a specific form of mortgage that is between the seller and buyer of the property. It usually involves instances where “the buyer cannot qualify for a mortgage through traditional lending channels. A purchase-money mortgage can be used in situations where the buyer is assuming the seller’s mortgage, and the difference between the balance on the assumed mortgage and the sales price of the property is made up of seller financing.”

Ad Valorem taxes are assessed taxes, most commonly known as property taxes. Texas does not have a statewide property tax, but there is a standard procedure that the comptroller has set for all districts assessing the property in their jurisdictions.

An owelty partition order or agreement commonly arises in divorces or probate situations when one party is attempting to buy out another party for their interest in the real estate and uses the property as collateral for a loan. In a divorce, if one party is keeping the house and the other is leaving, the remaining party can get forced to pay out the other person for their share of the property. The Texas Constitution spells out this exact situation, saying, “including a debt of one spouse in favor of the other spouse resulting from a division or an award of a family homestead in a divorce proceeding.”

The descriptions in the Texas constitution involved a refinanced lien against the homestead, a lien used for new construction improvements, or credit extensions are long, thorough, and detailed and beyond the scope of this piece. There are also provisions in the Texas constitution that cover reverse mortgages and certain situations involving a manufactured or mobile home.

If a Texas homestead falls into one of these categories, the protections that normally prevent creditors from using a seizure or forced sale will not apply or will not carry the same strength of protection.

Special tax benefits to the Texas homestead

Aside from protection against creditors and other situations, there are also tax benefits that apply to homesteads. The Texas Comptroller lists five different tax exemptions available to those claiming a homestead:

  • School taxes: All residence homestead owners are allowed a $25,000 homestead exemption from their home’s value for school taxes.

  • County taxes: If a county collects a special tax for farm-to-market roads or flood control, a residence homestead is allowed to receive a $3,000 exemption for this tax. If the county grants an optional exemption for homeowners age 65 or older or disabled, the owners will receive only the local-option exemption.

  • Age 65 or older and disabled exemptions: Individuals age 65 or older or disabled residence homestead owners qualify for a $10,000 homestead exemption for school taxes, in addition to the $25,000 exemption for all homeowners. If the owner qualifies for both the $10,000 exemption for age 65 or older homeowners and the $10,000 exemption for disabled homeowners, the owner must choose one or the other for school taxes. The owner cannot receive both exemptions.

  • Optional percentage exemptions: Any taxing unit, including a city, county, school, or special district, may offer an exemption of up to 20 percent of a home’s value. But, no matter what the percentage is, the amount of an optional exemption cannot be less than $5,000. Each taxing unit decides if it will offer the exemption and at what percentage. This percentage exemption is added to any other home exemption for which an owner qualifies. The taxing unit must decide before July 1 of the tax year to offer this exemption.

  • Optional age 65 or older or disabled exemptions: Any taxing unit may offer an additional exemption amount of at least $3,000 for taxpayers age 65 or older and/or disabled.

Obtaining these tax benefits involves establishing a homestead and filing the appropriate paperwork with the state of Texas.

Tax benefits and protections against creditors make Texas homesteads one of the most powerful legal and financial tools for homeowners in the lone star state.

Daniel C. Vaughan is an experienced attorney who has worked on or consulted in numerous lawsuits for Fortune 500 companies and the top law firms in the country. He’s worked on multi-state class action lawsuits, government investigations, and more. He leads teams of attorneys to bring new technology to bear on legal problems to reduce legal spend and find innovative solutions. He received a law degree from Regent University School of Law and a Bachelor of Science from Middle Tennessee State University where he graduated from the University Honors College.

LEGAL DISCLAIMER: Information in this article is provided free of charge and purely for informational and educational purposes only and is not offered as legal advice. No attorney-client relationship is created by the offering of this article. TEXASASSETPROTECTION.COM is not a law firm, does not represent clients, and is not representing you or anyone else. Although every effort is made to keep information up-to-date, laws may change. Retaining legal counsel for your individual case and circumstance is advisable before taking any action that has legal consequences. Consult a tax advisor or financial consultant as well, as this is not offered for any tax or financial service or advice.
Feature Photo by JOSHUA COLEMAN on Unsplash