What property tax deferral does and who it's for

Property tax deferral in Texas lets you postpone paying property taxes on your home while you live in it. You don't pay the taxes now; instead, the state puts a lien on your property, and the taxes become due when you sell the home, move, or pass away. This is not a reduction or forgiveness of taxes — you will owe the full amount plus interest eventually.

Texas offers deferral to homeowners age 65 and older, disabled homeowners of any age, and families with a disabled member. The program is designed for people with limited income who would struggle to pay their annual tax bill while staying in their homes.

Deferral does not lower your tax bill. It shifts when you pay. The state charges interest on the deferred amount, currently set by law but varying year to year. You remain responsible for maintaining homeowners insurance and keeping the property in good condition.

Key Takeaways

  • Property tax deferral postpones your tax payment until you sell your home, move away, or pass away — the taxes don't disappear, they accumulate with interest.
  • You must be age 65 or older, disabled, or live with a disabled family member, and meet income limits that vary by county.
  • You apply through your county appraisal district, not the state, and the process takes several weeks after you submit required documents.
  • Once approved, deferral continues automatically each year unless you move, sell, or your income rises above the limit.
  • The state places a lien on your home for the deferred amount, which the buyer or your estate must pay when the property changes hands.

Income limits and who qualifies

Texas sets income limits for deferral, but the exact threshold depends on which county you live in. Each county appraisal district sets its own limit based on a percentage of the state's median household income. In 2024, limits ranged from roughly $30,000 to $40,000 annually for a single person, though this varies. You must contact your county appraisal district to learn the current limit for your county.

Income includes wages, Social Security, pensions, rental income, and investment returns. It does not include certain one-time payments or some types of assistance. The appraisal district will ask you to document your income with recent tax returns, Social Security statements, or bank records showing regular deposits.

If you are age 65 or older or disabled, you may defer taxes on your primary residence only. If you own rental property or a second home, deferral does not apply to those. The home must be your homestead — the place you actually live.

How to apply through your county appraisal district

You apply for deferral at your county appraisal district office, not through the state. Find your district by searching "[your county name] appraisal district" online or calling your county assessor's office. Most districts accept applications by mail, in person, or online through their website.

You will need to submit a completed application form (usually called the "Application for Tax Deferral" or similar), proof of age or disability, proof of income, and documentation that the property is your homestead. Proof of age is a birth certificate, driver's license, or passport. Proof of disability is a letter from a doctor, a disability information letter from Social Security, or a Veterans Affairs rating.

The appraisal district reviews your application and notifies you of approval or denial in writing, typically within 30 to 60 days. If approved, deferral begins for the current tax year. If denied, the letter will explain why and tell you how to appeal.

What happens after you are approved

Once approved, you stop receiving property tax bills for that year. The county still assesses your property and calculates the tax, but you do not pay it. Instead, the state records a lien against your home for the deferred amount. This lien is public record and shows up in a title search.

Deferral continues automatically each year as long as you live in the home and your income stays below the county limit. You do not have to reapply annually, though some counties may ask you to update income information every few years. If your income rises above the limit, the appraisal district will notify you and deferral will end.

Interest accrues on the deferred taxes. The interest rate is set by state law and changes annually; in recent years it has been between 5 and 8 percent. The total amount owed — original taxes plus accumulated interest — becomes due when you sell the home, move away, or pass away.

What triggers the deferred taxes to become due

The deferred amount plus interest must be paid when any of these events occur: you sell the property, you move and establish a new homestead elsewhere, you pass away, or your income permanently exceeds the county limit. If you sell, the buyer's title company will discover the lien during the title search and require the deferred taxes to be paid from the sale proceeds before the sale closes.

If you move but do not sell — for example, you rent out the home — deferral ends and you must pay all deferred taxes within a set period, usually 30 days. If you pass away, your estate or heirs must pay the deferred amount before the property can be transferred or sold.

If your income rises above the county limit, the appraisal district will send you a notice. You then have a grace period (usually one year) to bring your income back below the limit. If you do not, deferral ends and the deferred taxes become due.

How deferral affects selling your home

When you sell your home, the title company will find the tax deferral lien during the title search. The deferred taxes plus interest must be paid from your sale proceeds before the deed transfers to the buyer. This reduces the net amount you receive from the sale.

For example, if you deferred $5,000 in taxes over five years and interest totaled $1,500, you would owe $6,500 at closing. This amount comes out of your sale price before you receive your proceeds. Your real estate agent or title company can estimate the total owed if you provide them with your county appraisal district account number.

You should factor this into your decision to defer. If you plan to sell within a few years, deferral may not save you money because the interest will accumulate quickly. If you plan to stay in the home for many years, deferral gives you cash flow relief now in exchange for a larger payment later.

Deferral versus other property tax relief options

Texas offers other ways to reduce property taxes besides deferral. Homestead exemption reduces the taxable value of your home and lowers your annual bill permanently — you do not have to pay it back. Over-65 exemption provides additional relief if you are age 65 or older. Disability exemption is available to disabled homeowners. These are not the same as deferral.

You can use both deferral and an exemption at the same time. For example, you might claim a homestead exemption to lower your annual tax bill, and also defer the remaining taxes you owe. Talk to your county appraisal district about which combination makes sense for your situation.

Deferral is most useful if you have very limited income now but expect your situation to improve, or if you need immediate cash flow relief and can afford to repay the taxes later. Exemptions are better if you want permanent relief and do not plan to move.

Frequently Asked Questions

Can I defer taxes on a rental property or second home?

No. Deferral only covers your primary residence — the home where you actually live. Rental properties and vacation homes do not may have access to, even if you own them outright.

What if I become ineligible because my income goes up?

The appraisal district will notify you in writing. You typically have one year to bring your income back below the limit. If you do not, deferral ends and you must pay all deferred taxes within 30 days. You can appeal the decision if you believe the income calculation is wrong.

Does deferral affect my credit score?

No. Deferral is a legal program, not a debt default. The lien is recorded but does not appear on your credit report. However, it does show up in a title search, so lenders and title companies will see it.

Can my heirs keep the deferral after I pass away?

No. When you pass away, deferral ends immediately and the deferred taxes plus interest become due. Your estate must pay this amount before the property can be transferred or sold. Your heirs cannot continue deferral on the property.

How do I find out how much I owe in deferred taxes?

Contact your county appraisal district and provide your account number or property address. They can tell you the total deferred amount and the current interest accrued. You can also request a written statement for your records.