Texas Homestead Exemption: What Happens When You Sell Your Home?

By Stephen Harris | July 21, 2026

The Texas homestead exemption is one of the most valuable property tax benefits in the state — and one of the most misunderstood when it comes to selling. If you’re thinking about selling your home in Texas, here’s what the homestead exemption means for your sale, your tax bill, and your buyer.

What Is the Texas Homestead Exemption?

The Texas homestead exemption is a property tax reduction for the owner of a primary residence. It reduces the taxable assessed value of your home, which directly reduces your annual property tax bill. There are several layers to it:

General residence homestead exemption. As of legislation passed in 2023, the general exemption reduces your home’s assessed value by $100,000 for school district tax purposes. This replaced the prior $40,000 exemption and represents a meaningful annual savings on most Killeen properties.

Over-65 exemption. Homeowners who are 65 or older receive an additional exemption and a freeze on their school district taxes. Once you qualify at 65, your school district portion of property taxes cannot increase as long as you remain in that home. This freeze does not transfer when you sell.

Disabled homeowner exemption. Homeowners with a disability as defined by the Texas Tax Code can qualify for an additional exemption similar to the over-65 benefit.

Disabled veteran exemptions. Texas offers graduated exemptions for veterans rated disabled by the VA, up to 100% exemption for veterans with a 100% service-connected disability rating. These are among the most significant property tax benefits available in Texas and are tied to the veteran’s primary residence.

All of these exemptions apply only to your primary residence. You cannot claim the homestead exemption on a rental property, second home, or any property you don’t actually occupy as your main home.

What Happens to the Homestead Exemption When You Sell?

The exemption ends. It does not transfer to the buyer.

When you sell your home and the deed records in the new owner’s name, the homestead exemption terminates on that property. The appraisal district updates their records once the deed change is recorded. You don’t have to file any paperwork to remove it — it goes away automatically.

Property tax proration at closing. Texas property taxes are assessed annually but paid in arrears. At closing, the settlement statement will prorate property taxes between buyer and seller based on the closing date. The seller is responsible for taxes through the date of closing; the buyer takes on responsibility from that date forward. This proration uses the current year’s tax amount as the basis. If you’ve been receiving the homestead exemption, your prorated share is calculated based on your exempted tax rate — the buyer’s going-forward tax rate will be different (and potentially higher) once they establish their own exemption.

The Assessment Cap Issue: What Buyers Should Know

Texas law limits how much a county appraisal district can increase the assessed value of a homesteaded property in any single year: the cap is 10% annually. This means that if your home has been assessed at $180,000 for several years while the market value has risen to $230,000, your taxable assessed value stays capped — it can’t jump to $230,000 in one year while you’re homesteaded.

But when the property sells and the homestead exemption lapses, the cap resets. The appraisal district can reassess the property at full market value in the next tax cycle. For the new buyer, this means their property taxes in year two after purchase may be significantly higher than year one, because year one is based on the prior owner’s capped assessed value while year two is based on the newly reassessed market value.

In Killeen, where some properties have been owned for many years with continuously applied homestead exemptions, the gap between assessed value and market value can be substantial. Buyers who are aware of this ask about it — buyers who aren’t aware of it sometimes feel blindsided when their second year’s tax bill arrives.

Texas Homestead Protection from Creditors

There’s a separate dimension of Texas “homestead protection” worth distinguishing from the tax exemption: legal protection from creditors.

Texas law provides that your primary residence cannot generally be seized to satisfy unsecured debts — credit card debt, medical bills, personal loans, most civil judgments. But this protection is specifically against forced seizure by creditors. It does not prevent you from selling your home voluntarily. When you decide to sell, the homestead creditor protection is not a factor in the transaction.

Important exceptions: mortgage lenders can foreclose for non-payment (a consensual lien you agreed to). Property tax authorities can foreclose for unpaid taxes. Contractors may have mechanic’s lien rights. The IRS can pursue tax liens. These creditors’ rights are specifically preserved by Texas law even against homesteaded property.

After the Sale: Applying for the Exemption on Your Next Home

If you’re selling your Killeen home and buying another Texas property, you’ll need to apply for the homestead exemption on your new home separately. It doesn’t automatically transfer.

The filing deadline for homestead exemption in Texas is April 30 of the tax year, though late filing is permitted in some situations. File as soon as possible after your new home closes — the sooner you file, the sooner you receive the benefit.

For the over-65 and disabled veteran exemptions in particular, filing promptly matters. The over-65 school district tax freeze doesn’t take effect until the exemption is on the property, so every month you delay filing is a month at the higher tax rate.

The Bell Central Appraisal District (Bell CAD) handles homestead exemption applications for properties in Killeen and the surrounding Bell County area.

Frequently Asked Questions

What is the Texas homestead exemption?

A property tax reduction for the owner of a primary residence. The general exemption reduces taxable assessed value by $100,000 for school district taxes. Additional exemptions apply for homeowners 65+, disabled, or 100% disabled veterans. Applies only to primary residence; must be applied for with the county appraisal district.

What happens to the homestead exemption when you sell your house in Texas?

It ends when ownership changes and the deed records in the new owner’s name. It doesn’t transfer to the buyer. Property taxes are prorated at closing. The buyer must apply for their own exemption. The appraisal district can reassess to full market value after the sale, potentially causing a significant tax increase for the buyer in year two due to the lapse of the 10% annual assessment cap.

Does the Texas homestead exemption affect my property taxes after I sell?

It affects the buyer’s taxes significantly. Texas’s 10% annual assessment cap means your assessed value may be well below market value. When the exemption lapses at sale, the appraisal district can reassess to market value — causing a potentially significant tax increase for the new buyer starting in year two of ownership.

Does Texas have a homestead protection from creditors that affects selling?

Texas protects your primary residence from seizure by most unsecured creditors, but this doesn’t affect a voluntary sale. When you choose to sell, the creditor protection is not a factor. Mortgage lenders, property tax authorities, and mechanic’s lienholders retain their rights even against homesteaded property.

When should I remove the homestead exemption after selling my house in Texas?

You don’t need to remove it — it terminates automatically when the deed records in the buyer’s name. Apply for the homestead exemption on your new Texas residence as soon as possible after closing. The filing deadline is April 30, but file early to receive the benefit for the current tax year. Contact Bell CAD for the application process in Bell County.