Seniors Can Stop Paying Property Taxes in Texas
What happens if a 65+ homeowner doesn’t pay them? (Hint: They don’t go away.)
on December 10, 2018
Updated on August 3, 2022
Normally, if you fail to pay your property tax, your house can be seized by the government and sold at auction. But Texas actually provides special protections for elderly and disabled homeowners. If you qualify for these protections, your home is protected from seizure even if you do not pay your property tax.
While, in theory, property tax deferment may sound like something to take advantage of, tax attorneys like Mary E. Wood say there’s more to it than meets the eye.
“Just because you can defer doesn’t mean it goes away,” says Wood, who works at Meadows, Collier, Reed, Cousins, Crouch & Ungerman in Dallas. “Obviously, interest will continue to accrue while you’re deferring property taxes and, if you have a mortgage on the home, oftentimes that will be a violation of the terms of the mortgage. The mortgage company may say you’re in default. And if the person passes away, whoever inherits that property—like your family—will be responsible for those taxes.”
So, of course, there is a catch: The tax does not simply disappear.
The Basics of Property Tax Deferral
So how does this work? Section 33.06 of the Texas Property Code explains the procedures for “deferred collection” of property taxes. A property owner is only qualified to seek a deferral if they are either 65 years or older, a person receiving federal disability benefits as a disabled person, or a disabled veteran.
The deferral itself may only be used against a residence homestead—that is, a residence that the qualified individual personally owns and occupies as their home. So you cannot use a deferral against property taxes owed a rental or investment property. And the person seeking the deferral must file an affidavit with the chief appraiser of their local appraisal district that states they are qualified for the deferral under the standards described above. If local authorities have already filed a lawsuit to collect delinquent taxes or moved to sell the property, then the homestead owner may file the affidavit with the court to stop the proceedings. Once established, the deferral means the government cannot proceed with any property tax collection efforts.
This does not erase the tax. A deferral is just that: a delay in when the tax becomes due. According to Section 33.06, the deferral lasts until the 181st day after a certain qualifying event occurs that terminates the deferral. The two most common qualifying events are: (1) the owner sells the property; and (2) the owner dies. In the case of death, the deferral may be extended if the owner had a surviving spouse who was at least 55 years old and continues to live in the house. Once the deferral expires, all of the previously unpaid property taxes become due–plus 8 percent interest. And there may be additional penalties and interest on any deferred taxes that are not paid within 181 days of the termination date.
The Costs of Deferring Property Taxes
Even if you qualify for a deferral and file an affidavit, it may still be in your best interests to continue paying your property tax normally. For one thing, you’ll avoid the 8 percent interest charge. For another, any deferred taxes will appear on public land records as “delinquent” taxes, which can seriously impact your credit rating. The main benefit of a tax deferral is that it prevents assessment of penalties if you are occasionally late with a payment.
If you’re short on cash and thinking of deferring, consider speaking with a qualified Texas tax attorney. They may be able to find other savings opportunities and, at the very least, can properly contextualize the downsides of property tax deferment.
“With anything in tax, you take advantage of certain provisions in income tax code or property tax code, but you have to think about what other ramifications might potentially be out there,” Wood says. “With most tax code-related issues, you can’t look at one piece and think, ‘That’s the magic bullet!’ You have to dive in and see the issues surrounding it.”
If you want more information on this area of law, see our tax overview.