What changes when you rent out your Texas home?
Renting out your Texas home ends the homestead exemption and 10% cap, changes your insurance, adds landlord duties and starts a federal tax clock.
Updated November 2026
Short answer: when your Texas home stops being your main home, you lose the homestead exemption and its 10% appraisal cap, and you must tell the appraisal district in writing. You need landlord coverage, you take on chapter 92 landlord duties, and a federal tax clock starts. Decide whether to keep or sell before you move.
| What changes | What happens | What to do |
|---|---|---|
| Homestead exemption | Ends once it’s not your principal residence | Notify the appraisal district in writing before May 1 of the next year |
| 10% appraisal cap | Expires January 1 after you no longer qualify | Ask what your value would be without the cap |
| Insurance | Homeowner’s policy may not cover a rental | Switch to a landlord (dwelling) policy |
| Landlord duties | Texas Property Code chapter 92 applies | Repairs, locks, smoke alarms, deposits |
| Federal tax | Exclusion clock and depreciation start | Talk to a CPA before you move out |
When does your homestead exemption end?
It ends once you move out and rent the home, because a Texas residence homestead must be occupied as your principal residence. The exemption keeps running until you report the change, so you have to tell the appraisal district.
| Rule | What it means |
|---|---|
| Status is set on January 1 | Your eligibility in a tax year depends on your situation on January 1 of that year. |
| You must notify in writing | The exemption isn’t claimed again each year. Notify the chief appraiser in writing before May 1 of the year after your right to it ends. |
| Temporary absence has limits | Under two years can keep homestead status if you plan to return and set up no other principal residence. |
| Special absences | Military service or living in a care facility are treated differently. |
Once you set up a different principal residence, the temporary-absence rule no longer helps. Find your appraisal district in the Comptroller’s appraisal district directory, and ask how they want the notice sent.
What happens to the 10% appraisal cap?
You lose it: the cap expires on January 1 of the first tax year after you no longer qualify. While a home has a homestead exemption, its taxable (appraised) value can’t rise more than 10% a year, plus new improvements. That limit only applies to a property receiving a residence homestead exemption.
If your market value climbed faster than the cap allowed, the taxable value can catch up to market value in the first year it’s a rental. Ask the appraisal district or a property tax consultant what your value would be without the cap before you set the rent.
Do you need different insurance for a rental?
Yes, usually: the Texas Department of Insurance (TDI) warns a standard homeowner’s policy often won’t cover damage to a rental, or may limit what it pays. TDI says landlord insurance can add protection and is meant mainly for traditional, long-term leases, not short-term rentals.
Settle these with your insurance agent before the tenant moves in:
| Item | What to know |
|---|---|
| Your policy | Switch to a landlord (dwelling) policy, or get written confirmation your current policy covers a rental. |
| Tenant’s belongings | A landlord’s policy won’t cover them. Some landlords require tenants to carry renters insurance. |
| Vacancy | 60+ days empty is a reason TDI lists for cancellation or nonrenewal. Most companies stop coverage then. Tell your insurer. |
Does your mortgage allow you to rent the home?
Your loan documents and your lender can tell you; we can’t. Read your note and deed of trust for any section on occupancy, and call your loan servicer before you move out.
What are your duties as a Texas landlord?
Texas Property Code chapter 92 sets the basic rules: repairs, security devices, smoke alarms, an emergency number and security deposits. At a high level:
| Duty | What the law says | Where |
|---|---|---|
| Repairs | You must make a diligent effort to repair a condition that materially affects the physical health or safety of an ordinary tenant, once the tenant gives notice and isn’t behind on rent. You generally don’t have to repair damage the tenant or their household or guests caused, other than normal wear and tear. | §92.052 |
| Security devices | The home must have a window latch on each exterior window, a keyed dead bolt or doorknob lock and a keyless bolting device and door viewer on each exterior door, and a pin lock plus a handle latch or security bar on each exterior sliding glass door, with some exceptions. | §92.153 |
| Smoke alarms | At least one smoke alarm in each separate bedroom, with more rules for shared hallways and multi-level homes. Test it at the start of the tenant’s possession, and inspect or repair it during the lease when the tenant reports a problem. | §92.255, §92.258 |
| Emergency number | Give the tenant a phone number for reporting emergencies that affect health or safety. | §92.020 |
| Security deposit | Refund the deposit on or before the 30th day after the tenant surrenders the home. You can’t deduct for normal wear and tear, and if you keep any of it you must give a written, itemized list of deductions. | §92.103, §92.104 |
This is a summary, not the full law. The Texas Attorney General’s Renter’s Rights page explains the same rules from the tenant’s side. Some Texas cities add their own rules: Dallas and College Station, for example, require rental homes to be registered. Check with your city.
How does renting change your federal taxes?
A federal tax clock starts: the home-sale exclusion window begins to run out and depreciation begins. Texas has no state income tax, but federal rules change once the home is a rental. Talk to a CPA before you move out.
| Rule | What it says |
|---|---|
| Home-sale exclusion | Usually up to $250,000 of gain, or $500,000 for most married couples filing jointly, if you owned and lived in it as your main home 24 months of the 5 years before the sale. The months don’t have to be in a row. |
| Time after you move out | IRS Publication 523 says time after you last lived there, within the 5-year window, doesn’t count against you as “nonqualified use.” |
| Depreciation starts | On the date you convert it to rental use. Basis is the lower of adjusted basis or fair market value that day. Land can’t be depreciated; buildings generally go over 27.5 years. |
| Depreciation comes back | Even if the sale qualifies for the exclusion, gain equal to depreciation allowed or allowable after May 6, 1997 can’t be excluded. |
“Allowable” means the IRS treats you as having taken it, even if you didn’t claim it.
Illustrative example: you live in the home for exactly two years, then move out and rent it. To still meet the 2-of-5 test, you would generally need to sell within three years of moving out. After that, the exclusion is generally gone unless you move back in.
Should you keep it or sell before you move?
Decide before you sign a lease, because selling an empty home is usually simpler than selling one with a lease in place. If several answers below point toward selling, talk to us before the tenant moves in. Our guide on whether to sell or rent your house walks through the numbers.
- Do I want to be a landlord for years, or am I renting because I’m not sure yet?
- Will the rent cover the mortgage, the higher property tax without the homestead exemption and cap, landlord insurance, repairs and the months it sits empty?
- Do I have cash set aside for a major repair, like a roof or HVAC system?
- Does my loan allow me to rent the home? Have I asked my servicer?
- When would I have to sell to keep the home-sale exclusion, and is that a date I could live with?
- Who handles repairs and emergencies if I’m not nearby?
- Am I ready to follow the chapter 92 rules on repairs, locks, smoke alarms and deposits?
- Would the money from selling now do more for my next home or goals?
Already renting it out and thinking about selling? Read Selling a rental home with tenants in Texas. A partner agent can show you what the home would sell for now and help you weigh that against keeping it.
Frequently asked questions
Do I have to tell the appraisal district when I move out?
Yes. The homestead exemption doesn’t need to be claimed again each year, so it keeps running until you report the change. You must notify the chief appraiser in writing before May 1 of the year after your right to the exemption ends.
Can I keep my homestead exemption if I move out temporarily?
Sometimes. A home can keep homestead status during an absence of less than two years if you plan to move back and don’t set up a different principal residence. Absences for military service or living in a care facility are treated differently.
Will my homeowner’s insurance cover the house once it’s rented?
Often not fully. TDI warns that a standard homeowner’s policy often won’t cover damage to a rental property, or may limit what it pays. Switch to a landlord (dwelling) policy, or confirm in writing that your current policy covers a home you rent out.
How long do I have to sell and still use the home-sale exclusion?
It depends on how long you lived there. You need 24 months of ownership and use as your main home in the 5 years before the sale. If you lived there exactly two years, you would generally need to sell within three years of moving out.
Sources
- Residence homestead must be occupied as the owner’s principal residence; temporary absence of less than two years with intent to return, if no other principal residence is set up; military and care-facility exceptions: Texas Tax Code §11.13(j) and (l).
- Eligibility for an exemption set by qualifications on January 1: Texas Tax Code §11.42(a).
- Homestead exemption need not be claimed again each year; written notice to the appraisal office before May 1 after the right to the exemption ends: Texas Tax Code §11.43(c) and (g); also the “Duty to Notify” section of the Comptroller’s Form 50-114, Application for Residence Homestead Exemption.
- 10% homestead appraisal limit, only on a property receiving a residence homestead exemption, and its expiry on January 1 after the owner no longer qualifies: Texas Tax Code §23.23(a) and (c); Texas Comptroller, Appraisal and Tax Limitations.
- Homeowner’s policies often don’t cover damage to a rental; landlord insurance mainly for long-term leases: TDI, Renting out your home? Check your insurance.
- Landlord’s policy won’t cover a tenant’s items; some landlords require renters insurance: TDI, Renters insurance.
- Vacancy of 60 days or more as a reason for cancellation or nonrenewal: TDI, Home insurance guide.
- Landlord duties (repairs, security devices, smoke alarms, emergency number, security deposits): Texas Property Code sections linked in the table above; Texas Attorney General, Renter’s Rights.
- Texas has no state income tax: Texas Comptroller, Texas is open for small business and Property Tax Cuts as Large as Texas.
- City rental registration examples: City of Dallas, Single Family Rental Registration and Inspection Program; City of College Station, Rental Housing.
- Home-sale exclusion: 24 months of ownership and use in the 5 years before sale, $250,000 / $500,000 limits, months need not be continuous, time after you last lived there within the 5-year period is not nonqualified use, depreciation after May 6, 1997 not excludable, basis reduced by depreciation you could have taken: IRS Publication 523, Selling Your Home.
- Depreciation begins when a personal home is converted to rental use; basis is the lesser of adjusted basis or fair market value at conversion; land not depreciable; 27.5-year recovery period for residential rental property: IRS Publication 527, Residential Rental Property.