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Homesteading ?

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  • diveRN

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    Since we're going to be buying a home in Texas within the next 90 to 120 days, I'm curious about how many of you have "homesteaded" your property and WHY you did it, if you can explain without going into too much detail about your personals. I've done some casual reading on the subject and have a rudimentary understanding of the pros and cons, but I'm curious about what the lay real estate/financially savvy folks who live in Texas actually think about it.

    Part of our long term strategy out here in California involves a little real estate and I need to see if what we're doing here will work with what we want to do out there once we move.

    Upsides? Downsides? Tax consequences? Know a good finance guy/gal in the Metroplex area? We already have a Realtor out there and she's been very responsive to questions, but she can't really advise. If you advise for a living, send me your contact info via PM.
     

    karlac

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    There is no good reason not to apply for a Homestead Exemption on your primary residence in Texas, unless you just like to pay higher taxes based on the full appraised value. Check with the county appraisal district for the form.
     

    benenglish

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    "Homesteading" has several meanings. You might want to specify, especially if you're asking about it in the sense of "maintaining self-sufficiency", as it's often used these days.
     

    diveRN

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    "Homesteading" has several meanings. You might want to specify, especially if you're asking about it in the sense of "maintaining self-sufficiency", as it's often used these days.

    Interesting. Clearly, I have a lot more reading to do. Didn't realize there were that many distinctions.

    So as not to bias any replies, I'll hold off on posting my intent for now.
     

    Mexican_Hippie

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    Homesteading just lowers your taxes and provides protections under bankruptcy law. It's a simple form that everyone does on their primary residence.

    There's no requirement to actually live a self sustaining lifestyle, just fill out a form.
     

    Mic

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    Homesteading (living a self-sufficient lifestyle) is a whole different ballgame than what I believe you are talking about - declaring a property a homestead for the legal protections against creditors.

    I thought the same thing Ben must have when I saw the title - Sweet, a thread about self-sufficient living.
     

    karlac

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    A few years back Texas closed the loopholes on the possibility of someone claiming more than one primary residence, either in Texas or another state, by requiring applicants to provide a copy of their Texas driver's license or Texas state-issued identification card, and a copy of their vehicle registration receipt with their application for a homestead exemption.

    Not inferring that's the OP's intent by any means, but that's usually the first question asked by someone from out of state wanting to know about Homestead law in Texas. :)
     

    diveRN

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    A few years back Texas closed the loopholes on the possibility of someone claiming more than one primary residence, either in Texas or another state, by requiring applicants to provide a copy of their Texas driver's license or Texas state-issued identification card, and a copy of their vehicle registration receipt with their application for a homestead exemption.

    Not inferring that's the OP's intent by any means, but that's usually the first question asked by someone from out of state wanting to know about Homestead law in Texas. :)

    Ok, here's a few specifics. My intent with the original post was to solicit responses to give me fodder for research because I don't know what I don't know. For example, I had no idea you could claim it specifically for "self-sufficiency" reasons.

    1. My wife and I will be starting business operations in Texas when we come. She currently has an office in the city we now live in, but when we open our "branch office" there (read: move), she'll be working from home for the first year or so until her clientele base is large enough to justify office space... and there's a possibility that she may not grow to that point. She's talked about slowing down a bit to spend more time with my son.

    At present, we're going to maintain operations here, too. I've yet to study the various business/tax laws we'll face when we get there. Does partial business use preclude homesteading? Are there tax issues related to this? Asset protection is something we're looking at, but we'll also be transferring our LLC following the move.

    2. We owned three homes here that my wife and I bought when the market was down. We've managed to flip them (including our primary) for a nice gain and want to use the capital to put down at least half on what we buy in Texas so we're into a comfortable monthly mortgage payment. The original intent of purchasing the homes was to let them appreciate and sell around the time my kid goes off to college in 2022. College money. However, if I buy in Texas, can I borrow against a homestead later in the form of a Home Equity Loan, HELOC, or reverse mortgage? I've read conflicting things about this. While we intend to stay in Texas indefinitely, we can't rule out leaving to live in a place we have in Mexico once my kid is out of school.

    There are some other considerations and I welcome replies about all things homestead related. We're looking at a place on acreage so the self-sufficiency avenue isn't off the table.
     

    karlac

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    Ok, here's a few specifics. My intent with the original post was to solicit responses to give me fodder for research because I don't know what I don't know. For example, I had no idea you could claim it specifically for "self-sufficiency" reasons.

    I don't think you can. ;)

    At present, we're going to maintain operations here, too. I've yet to study the various business/tax laws we'll face when we get there. Does partial business use preclude homesteading? Are there tax issues related to this? Asset protection is something we're looking at, but we'll also be transferring our LLC following the move.

    If it does, I'm in big trouble. :) Self employed for the past 40+ years in Texas, and have used an office in my home, upon which I have a homestead exemption, as my published business office, as well as my shop on the premises, for that duration. Unless things have changed recently, I am not aware of any problem with having a home based business in your residence upon which you have filed a homestead exemption. See the link below, which is pretty much how the cow ate the cabbage:

    Texas Property Taxes: Taxpayers' Rights, Remedies, Responsibilities

    2. .... if I buy in Texas, can I borrow against a homestead later in the form of a Home Equity Loan, HELOC, or reverse mortgage? I've read conflicting things about this.

    IANAL, but I'm 99.99% certain that to qualify for a HELOC in Texas, you are actually required to have a homestead exemption. That should be very easy to verify with your mortage company prior making a decision. The mortgage company will be the only one who can absolutely determine that for your circumstances, IME.

    There are some other considerations and I welcome replies about all things homestead related. We're looking at a place on acreage so the self-sufficiency avenue isn't off the table.

    The self sufficiency aspect is not a legal in nature, nor a part of the Homestead Exemption in Texas.
     

    Jlrockboy

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    You have to file once, at your county tax office. This should cover both your city and county taxes, you can only file on your primary home or residence.
     
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