Property taxes are a never-ending challenge. You never age out of them, and they often increase as the market changes. For a senior or disabled person with limited or no income, receiving a property tax bill year after year is especially stressful. A property tax deferral in Texas can lower that anxiety by postponing the deadline for your taxes.
Think of a tax deferral like an official IOU you give to the county. Each year, you add that year’s tax bill to the IOU, and the county adds interest to the total balance. You don't have to pay the IOU back until you sell the home, but the balance continues to grow.
Taking on this kind of debt can be a risk, so understanding the process is vital. This article walks you through how property tax deferral works in Texas, who’s eligible, how to apply, and what to watch out for.
What Is a Property Tax Deferral in Texas?
A tax deferral in Texas allows eligible homeowners to defer the collection of ad-valorem taxes on their residence homestead.
Under Texas Tax Code § 33.06, if you are age 65 or older, disabled as defined in §11.13, or a qualified disabled veteran (or surviving spouse) and own and occupy your home as a homestead, you can file an affidavit with your county appraisal district to defer the taxes.
Key points:
You still owe the taxes; they are not forgiven.
A lien remains on the property until paid.
Interest accrues.
The deferral ends when you move/sell/cease to qualify; then the taxes + interest are due.
Deferral vs. Exemption
A common point of confusion for Texas homeowners is the difference between a tax exemption and a tax deferral. An exemption is a form of tax relief, while a deferral is a loan and creates a debt.
The homestead exemption helps reduce your liability by lowering the taxable value of your home. This deduction is permanent, and you never have to repay it. For example, exemptions for seniors can reduce your home's value by $60,000.
A tax deferral, on the other hand, postpones your payment but doesn't reduce it. The debt grows with a 5% annual interest rate until you sell the home. You can apply for a homestead exemption and a deferral to reduce and delay your tax payments simultaneously.
The Purpose of Tax Deferrals
The tax deferral program in Texas helps vulnerable property owners stay in their homes. Seniors, people with disabilities, and disabled veterans often have limited financial resources, which can make it difficult to keep up with annual property tax bills.
Deferring your taxes helps you maintain compliance with the Texas property tax code. As a result, you can avoid a forced sale and stop collection calls for delinquent taxes.
How Does the 5% Interest on a Deferral Work?
When you file a tax deferral affidavit, the local government places a tax lien on the property to secure the debt. This lien remains in place until you pay off the debt or sell the home, and it accumulates interest at a 5% annual rate.
Texas Property Tax Code Section 33.06 sets the interest rate for deferred property taxes. Because this is new interest on the unpaid tax amount, the debt grows annually, and the program doesn't forgive or reduce your tax liability.
Who Qualifies for a Property Tax Deferral in Texas?
Here are the main eligibility groups:
Homeowner 65 years or older who owns and occupies the home as their residence homestead.
Homeowner who is disabled (according to Social Security or other state standard) and occupies the home as their homestead.
A disabled veteran, surviving spouse of a veteran, or unmarried child under 18 of a veteran who qualifies for the disabled veteran’s exemption; again, the property must be the residence homestead.
Meeting these requirements doesn't mean you no longer have to pay taxes, but you can continue to defer them as long as you or your qualified surviving spouse owns and lives in the home.
A Step-by-Step Process to Apply For a Texas Tax Deferral
To apply for deferred property taxes in Texas, you'll need to complete Tax Deferral Affidavit Form 50-126.
The form asks you to provide your name, identify which eligibility criteria you meet, and list the address of the property.
If applying as a surviving spouse, you'll need to enter additional information. Once completed, submit your tax deferral affidavit to your local appraisal district office or chief appraiser.
What Happens When the Homeowner Sells the Home or Passes Away?
A Texas property tax deferral for seniors, disabled persons, and veterans remains in effect until 181 days after the homeowner's death or when the homeowner no longer occupies the home. On the 181st day, the full deferred amount, including taxes for any unpaid years and 5-8% accrued interest over that period, is due and payable.
If the owner sells the property, they are responsible for paying the debt. If someone inherits the property after the owner's death, the lien passes to the heir.
Keep in mind that a tax deferral does not prevent a mortgage lender from paying delinquent taxes and potentially taking action. As a homeowner, you should notify the lender as soon as the deferral is approved.
Benefits and Risks of a Texas Property Tax Deferral
A property tax deferral isn't an ideal fit for everyone. Before applying, consider your current financial situation, including your income, expenses, and other avenues for financial relief.
Consider these upsides of a property tax deferral for seniors in Texas:
Immediate relief from annual property tax payments, freeing up cash flow
Assistance, security, and stability for qualified homeowners hoping to stay in their homes
No forced payments, since the tax bill and interest aren't due until the owner passes away, sells, or transfers the property
While these advantages are substantial, a tax deferral also comes with some drawbacks:
Accumulating taxes over time and creating debt
A rising lien, reducing home equity
Interest accruing at 5+% annually
Full balance due at sale, potentially complicating the closing process
If you're considering applying for a deferral, a financial advisor can help you calculate the long-term costs and weigh the pros and cons.
Take Advantage of Your Texas Tax Bill Options
A property tax deferral can be a useful emergency cash flow tool, but be careful not to treat it as free money. The taxes you owe don't disappear, and you or your surviving family members will have to pay them eventually.
Before you turn to a tax deferral, look at other ways to reduce your liability. Ownwell can help lower your tax bill with exemptions and appeals. Reach out today to save on your property taxes in three minutes or less.
