Downsizing in Frisco, without losing what you built

Many people who downsize in Frisco are not leaving Frisco. They raised a family in a two-story home with a big yard, and now they want one level, less upkeep and the same doctors, church and grandkids nearby. That is a good plan, and it comes with three money questions most people do not ask until late: what happens to my senior tax freeze, how much of my gain is taxable, and where can I actually find a single-story home I like.

This guide walks through each one with the source behind it. It is a starting point for good conversations with your CPA and, where needed, an attorney. I am a REALTOR, not a lawyer or CPA; for the legal side, <a href="https://angaritalaw.com">The Angarita Law Firm</a> can help, and a CPA should review your tax situation.

Texas gives homeowners 65 and older two big breaks on a homestead. First, under Tax Code Section 11.13(c), every school district adds a $60,000 exemption on top of the $140,000 general school homestead exemption. Section 11.42 says the over-65 exemption applies to the entire tax year in which you turn 65, so you do not wait until the next January.

Second, Section 11.26 sets a ceiling on school taxes: the district cannot raise your school tax above what you paid in the first year you qualified, unless you add improvements. Since 2024, the law also recalculates the ceiling downward when the state compresses school tax rates or raises the exemption.

Here is the part that matters for downsizers. The ceiling can move to your next Texas homestead as a percentage. Section 11.26(h) sets the new ceiling by applying the same ratio of frozen tax to full tax from your old home to the new one, and the appraisal district can issue a certificate with the numbers. So moving does not erase the benefit, but buying a much more expensive home can raise the dollar amount.

The City of Frisco adds its own layer: an additional $80,000 exemption for owners 65 or older or disabled on top of the 20% general homestead exemption, plus a city tax freeze for qualifying seniors effective since January 1, 2022. A surviving spouse who is 55 or older can keep the school ceiling if they stay in the home. Applications go to the county appraisal district, generally before May 1.

IRS Publication 523 explains the home sale exclusion. If you owned the home and lived in it as your main residence for at least two of the five years before the sale, you can exclude up to $250,000 of gain, or $500,000 if married filing jointly. Generally you can use it only once every two years.

Gain is your selling price minus selling costs, minus your adjusted basis. Basis starts with what you paid and goes up with improvements that add value, extend the home's life or adapt it to new uses, such as a new roof, an addition or a remodeled kitchen. Routine repairs generally do not count.

For long-time Frisco owners, that basis list is worth real money. If you bought in the early 2000s and the gain is near or above the exclusion, every receipt for a roof, HVAC system, pool or remodel can matter. From my years in construction and remodeling, I can help you list what was done and roughly when, and your CPA decides what counts.