Texas Over-65 Property Taxes When You Downsize: The $200,000 Exemption, the School Tax Ceiling, and What Actually Transfers

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Most Texas homeowners over 65 know they get a break on property taxes. Far fewer know that there are two separate benefits, that one of them can follow you to your next home and the other cannot, and that what transfers is a percentage rather than a dollar amount. Those details decide whether downsizing costs more or less than staying put. This page explains how the exemptions and the school tax ceiling work after the constitutional amendments Texas voters approved in November 2025, what happens when you move within Texas, and how the federal capital gains exclusion applies to a home you have owned for decades. Nitin Gupta, CRS, GRI, SRES, Broker Associate with Competitive Edge Realty, works with downsizing homeowners across Dallas-Fort Worth. Call 469-269-6541 or contact Nitin.

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This is general information, not tax or legal advice. Confirm your own situation with your CPA or attorney and with your county appraisal district before making decisions.

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Two different benefits that get confused constantly

The exemption reduces the taxable value of your home. It removes a fixed amount of value before the tax rate is applied.

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The tax ceiling, often called the freeze, caps the dollar amount of your school district taxes. It does not lower your value; it limits the bill.

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You can have both, they work differently, and only one of them can move with you. Mixing them up is the most common reason a downsizing plan produces a surprise in year one.

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The exemption: $200,000 of school district value, as of the 2025 tax year

Texas voters approved two constitutional amendments in November 2025. Proposition 13 raised the general school district homestead exemption from $100,000 to $140,000 for all homeowners.

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Proposition 11 raised the additional school district exemption for homeowners 65 or older, or who meet the Social Security definition of disabled, from $10,000 to $60,000.

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Together that is $200,000 of value exempt from school district taxes for a qualifying homeowner over 65, and both changes applied retroactively to the 2025 tax year. There is no income limit. If your home's value is at or below $200,000, the school district portion of your bill can go to zero.

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Two practical points. The over-65 exemption is a separate filing from the general homestead exemption, so having one does not mean you automatically have the other. And you qualify in the calendar year you turn 65, not on your birthday, so a December birthday still counts for that whole year.

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The ceiling: what it covers and what it does not

When you qualify for the over-65 or disabled exemption, your school district taxes are frozen at the amount imposed in that year. The bill can go down if rates fall, but rising appraisals cannot push it back above the ceiling while you own and live in the home. If you make improvements beyond normal repairs and maintenance, such as adding a room or a garage, the ceiling is adjusted upward to reflect that addition.

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The ceiling applies to school district taxes only. Your city, county, hospital district, community college and any municipal utility district or public improvement district assessment are not covered unless that specific entity has adopted its own optional over-65 ceiling, which some cities and counties in Texas have and others have not. In a newer master-planned community, the MUD or PID portion of the bill keeps charging in full. Read the MUD vs. PID guide for how those assessments work.

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A surviving spouse age 55 or older can keep the school tax ceiling on the same home when the qualifying spouse dies.

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Moving within Texas: the percentage transfers, not the dollar amount

This is the part almost nobody explains, and it is the single most valuable thing to understand before downsizing.

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Your ceiling does not follow you as a dollar figure. What transfers is the percentage of school tax you were paying compared with what you would have owed without the ceiling. The appraisal district calculates that ratio and applies it to your new home.

The Comptroller's own example: if your ceiling is $100 but you would pay $400 without it, you are paying 25 percent. Move to a home where school taxes would normally be $1,000 in the first year, and your new ceiling is $250.

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The longer you have held the ceiling, the wider the gap between the frozen amount and the market amount, and the more the percentage is worth when you move. A homeowner frozen fifteen years ago may be paying a small fraction of current school taxes, and that fraction, not the old bill, is what carries over.

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How to transfer it

• Request a tax ceiling certificate, Comptroller Form 50-272, from the chief appraiser of the appraisal district where you currently hold the ceiling.

• Remove the exemptions from the old homestead, noting the date you moved out.

• Apply for the residence homestead exemption and the over-65 or disabled exemption on the new home, Form 50-114, with the new appraisal district.

• Present the certificate to the new appraisal district when you apply.

The transfer works anywhere in Texas, including from one county to another. It does not work if you are moving in from another state, because there is no Texas ceiling to transfer.

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What this means when you downsize in Dallas-Fort Worth

• A smaller home does not automatically mean a smaller tax bill. A newer, smaller home in a growing suburb can appraise close to a larger older home, and if it sits in a MUD or PID, the total rate can be higher than what you left.

• Run the ceiling percentage before you choose an area, not after you are under contract. The same percentage applied in two different school districts produces two very different numbers.

• Ask what taxes will be after your purchase, not what the seller pays. Texas taxes follow the appraised value, and a listing's tax figure often reflects the seller's exemptions rather than yours.

• File promptly on the new home. The general and over-65 exemptions are separate applications, and the ceiling transfer requires the certificate.

• If cash flow is the problem rather than the tax itself, Texas allows homeowners 65 and older to defer property taxes on a homestead. Interest accrues and the balance becomes due later, so discuss it with your attorney or CPA and your family before using it.

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Capital gains on a home you have owned for decades

The other tax question that decides downsizing math is federal, not local. Under the principal residence exclusion, a single filer can generally exclude up to $250,000 of gain on the sale of a home, and a married couple filing jointly up to $500,000, provided the home was owned and used as a principal residence for at least two of the five years before the sale.

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For a homeowner who bought in Dallas-Fort Worth decades ago, the gain can exceed those limits, and that is when the details matter:

• Your basis is not just the purchase price. Capital improvements over the years, a room addition, a new roof structure, a pool, add to basis and reduce the gain. Records matter, which is why it is worth gathering them before listing rather than after.

• A surviving spouse may still use the $500,000 exclusion if the home is sold within a limited period after the spouse's death, subject to the requirements.

• Texas is a community property state, and the basis treatment of an inherited interest can change the calculation substantially for a widowed seller. This is a question for your CPA, and it is worth asking before you list.

Nitin does not give tax advice, and this is where your CPA earns their fee. What an agent can do is get you a defensible valuation, help you document improvements, and time the sale sensibly around the answers your CPA gives you.

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What to do next

If you are weighing whether to downsize, the sequence that works is: find out what your current ceiling percentage actually is, get a realistic value on your current home, price the total monthly cost of the homes you are considering including taxes, HOA dues and any MUD or PID, and only then decide. Doing it in that order prevents the most common outcome, which is a smaller house that costs more to own.

Start with the home value analysis, read about senior real estate services, or look at DFW retirement and 55+ communities. If you are an advisor or attorney with a client in this position, see the referral partner page.

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Over-65 property tax FAQs

How much is the Texas over-65 homestead exemption now?

$200,000 of school district value: the $140,000 general homestead exemption plus an additional $60,000 for homeowners 65 or older or disabled. Both increases were approved by Texas voters in November 2025 and applied retroactively to the 2025 tax year. There is no income limit.

What is the school tax ceiling, and what does it cover?

When you qualify at 65, your school district taxes are frozen at that year's amount. The bill can fall but generally cannot rise above the ceiling while you own and occupy the home, except for improvements beyond normal repairs. It covers school district taxes only, not city, county, hospital, college, MUD or PID, unless that entity has adopted its own optional ceiling.

Does my tax ceiling transfer if I move to another Texas home?

A percentage transfers, not the dollar amount. The appraisal district compares what you paid under the ceiling with what you would have paid without it, then applies that percentage to your new home. The Comptroller's example: a $100 ceiling against $400 without it is 25 percent, so a new home with $1,000 of school taxes would have a $250 ceiling.

How do I transfer the ceiling?

Request a tax ceiling certificate, Form 50-272, from the appraisal district where you hold the ceiling, remove the exemptions from the old home, then apply for the homestead and over-65 exemptions on the new home with Form 50-114 and present the certificate. It works anywhere in Texas but not when moving in from another state.

Will downsizing lower my property taxes?

Not automatically. A newer, smaller home can appraise close to a larger older one, and a MUD or PID assessment in a newer community can raise the total rate above what you were paying. Run the numbers on the specific home before committing.

How much gain can I exclude when I sell a long-held home?

Generally up to $250,000 for a single filer and $500,000 for a married couple filing jointly, if the home was owned and used as a principal residence for at least two of the five years before the sale. Capital improvements add to your basis and reduce the taxable gain, and a surviving spouse may still qualify for the $500,000 exclusion within a limited period. Confirm the specifics with your CPA.

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Work With Nitin Gupta

Nitin Gupta is a Broker Associate with Competitive Edge Realty with 480+ closed DFW transactions and 13 professional designations, including the Seniors Real Estate Specialist designation from the National Association of REALTORS along with CRS and GRI. He was named a D Magazine Best REALTOR® in 2020, 2023 and 2024 and serves clients in English, Hindi, Punjabi, Urdu and Gujarati. Read client reviews and see recent closings.

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If you are thinking about downsizing, tell Nitin where you live now, roughly how long you have held your over-65 exemption, the areas you are considering and your timing, and he will lay out what the move looks like on paper before you list anything. Call 469-269-6541.

Updated September 2026.

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