Vets Pay Zero Property tax – Hey, this is Mike and Shana Aquisto, real estate brokers and co-owner with Aquisto Real Estate in Frisco, Texas, freezing Frisco, Texas. It is cold and we’re going to speak about one hundred percent disabled veterans and the tax implications they have for the possibility to have an absolutely free isn’t zero property taxes on their primary residence when they have the homestead and it’s all properly completed.
So let’s kind of discuss that. But we’re going to go over the who, the why, the how the where the when each of those different things, some corporations related to closing at different times during the year and how that’s handled from a total company perspective and how it gets recorded and what we need to do and how many can you have and is it real.
And I think we’re going to we need to dissect it a little. Are we a perfect match from a buyer’s standpoint if you’re purchasing a property that has that exemption on it?
Well, I want to speak specifically about that trend and the benefits they get, and then we can look at it from different perspectives. So let’s first start from the veteran. OK, so the first thing I would say is thank you very much for the service. Absolutely. That’s an extremely big deal. I was not man enough to serve and you were right. So so thank you very much for that. It means a lot to me and in our family as well. So we totally appreciate that. So let’s talk about the benefit you get.
So if you are one hundred percent disabled as a veteran, not 80 percent, not some different number, up to 100. But if you are fully 100 percent and you have all of that correct paper documented, then you are entitled within the state of Texas to have one property listed as your primary residence in your homestead. And you would receive in that situation the benefit to pay zero property taxes is zilch.
Not only not one dollar, and I believe that’s truly afforded to you and you should be taking full advantage of it. Yes. All right. So that’s that’s impressive. Now, we need to talk through some of the logistics of this.
Ok, so when you apply for your mortgage to start with, if you do have a mortgage, what you’ll need to do is speak with your lender about this in particular, because as you speak, work through it with them. What you might have is your lender is going to say, well, we need to impound for taxes, insurance company, each of those different things. And as they do that, they will most likely want to hold back for taxes and they’re not going to confirm that. So then you have to provide all of those benefit documentations directly to the lender and give them proper time to be able to work through this.
So it would be probably important that you work with the lender that does understand this. Right. So possibly a a great lender like Brandon Hearn, who is also a disabled veteran himself, then that would be an important step to be able to do. Right. So I think that’s a great piece of advice. And so as we continue to walk through this now, we went over that. You have to turn this paperwork and you have to do those things and you can only utilize it once and it has to be recorded with the county and all that proper documentation.
Well, one one at a time. You can only have if you move in. Yes.
You can have it on the second property. Yes. And you have to go and release it and put it on. Not exactly positive how they’re handling it during the pandemic, but it is something that’s handled typically in person and it’s applied and moved from one to the other. They will not know that it’s not on that property. Right. If for one of those things, you’re technically not supposed to be renting that property out.
So there’s some weird case where you sell your home or you move out of the home and you become renting it, and that’s not considered your primary residence anymore or become a rental property. And that would need to be moved to the other property and you wouldn’t be able to do it there.
Ok, so we’ll follow all of those rules, but it’s a great benefit that you can have. Now, Sean was talking about preparations and preparations could be done in either one of those two ways, whether it’s from the veterans selling the property or the veteran buying the property. And so what we’re going to look at is there’s going to be taxes that are paid at the end of the year, right. For the year, which has occurred already. So property taxes are paid in arrears. Correct. So as are paid in arrears, what happens is they’re sort of preparation from the seller to the buyer and it’s figured out on the day of closing.
So if we were to use a super simple example and you closed it exactly halfway through the year, OK, right. Then we had a seller who occupied the property for the first half of the year. And if we again use a super simple No. And we said that the taxes were ten thousand dollars per year. OK, then the veteran, there would be a credit from the seller to the buyer for the first half because said, it’s exactly how I feel like we’re at five thousand dollars goes from the seller to the buyer.
And then in that situation, is the new purchaser at the when the taxes do pays 100 percent of those taxes in a typical situation. OK, now if we back this up just a little bit, we said either one of these two people is a disabled veteran and is entitled to zero property taxes, be it the seller or the buyer. Then the way that’s handled is the title company takes care of it and then they would reach out directly to the company. OK, and this would be moved from one to the other. It says that you’re supposed to do this immediately and go and take care of it, like, promptly. Right. And there won’t be a credit.
So if the seller is a veteran, they would have zero property taxes do. Right. And they would not give a credit to the other party, correct? Right. Zero.
That’s the main thing that I think would impact a buyer pretty significantly if he’s anticipating, you know, a lot of people will get that credit from taxes and. Right. And, you know, it kind of offsets some of the closing costs at the time unless they have to come out of pocket. But if they don’t have that, which I had happen three or four years ago, we learned that the seller of this property was a disabled vet, so he was not paid taxes. So closing are at the end of the year.
Our buyer would be responsible, you know, and then. And he wouldn’t be. No, he wouldn’t be responsible for all of it. Right. He would only be responsible for that portion of the year that he occupied the property. So the exemption from before would not be something he would have to pay. It starts from closing on.
Yes. So anyone that purchased the property as a buyer should expect if they don’t have this this exemption or any other one to pay property taxes based on the purchase price of the new of the property. Yes. And in this particular case, what happens is there’s just a zero put in for the first half of the year in this situation and then the other person would pay from it. So please consult your title company and the escrow officer. Please let everybody know in advance just so we can work through these progressions a little bit better. But that’s basically how it works.
So what I was kind of going with that previous thing I was discussing is, you know, a lot of times we, you know, the that the taxes are based on the previous year and all of that.
So when the when the buyer comes in, you know, he needs to look at what they are. Right.
Because it’s I mean, you have to you have to understand that I I think I’m not saying you’re right, but you have to know that you’re not getting you’re not getting that credit. Right. And another thing you have to know is it happens immediately. Not like the homestead. You don’t want to wait till January. Correct. It happens instantaneously as a.
I suspect, yes, that is true and correct, thinking. Yeah, yeah, that other thing just is zero.
Don’t worry about it. There’s not a thing you were talking a little bit about the money getting applied towards closing costs and maybe it helps them out and bring slightly more to closing. Yes. In certain situations. But like, it’s a super nominal number and let’s just not even worry about that.
And just it’s a non factor. But if one of the two parties involved notify your lender, let them know in advance, tell them it might take longer, get all of your paperwork, let the title company know and communicate with all the parties. Correct. That’s the basis behind it. And it’s zero for one party. Full for the other. Yeah, most likely same for the other exemptions, but just different. I don’t think so.
The the buyer may think, oh, if, if he got an exemption for six months it’s going to carry through the rest of the year and it does not and it doesn’t get first with that.
It’s like on that date finalized I don’t say. Yeah, yeah.
Ok, so we got it, we got only one property.
Good, huge benefit. So they can essentially buy a better property, more expensive property for themselves. And because they’re buying power should go more because they’re amazing and all that absolutely cheating. Now if you think that they totally deserve this, I do as well.