Harbaugh Real Estate

Texas Property Tax Relief Deal Has Been Struck

By Lee Harbaugh

After months of debate and posturing, the Texas legislature appears to have finally come to a consensus on property tax relief.

a house with the moon in the background

GOP lawmakers announced Monday (July 10, 2023) that they have reached an agreement on how to allocate the $18 billion funds earmarked to cover the long promised relief.

The biggest takeaway for most homeowners is that the plan increases the amount of exemption homeowners can take for the public school portion of the property tax. Currently, school districts are required to exempt $40,000 of property value for the homestead exemption. Under the new plan, that figure increases to $100,000. As an example, if a home is valued at $400,000, under the new plan, the school district could only tax $300,000 of value, assuming the home was the owner's homestead. School districts will receive the difference between what they would have received under the old plan and what they get under the new plan from the $18 billion earmark that was part of the state's budget surplus this year.

In addition to the $100,000 exemption, the new legislation will also include franchise tax savings for small businesses as well as a circuit breaker program for residential and commercial properties valued at $5 million or less. While details of the legislation have yet to be released, the circuit breaker would calculate property tax for non-homestead properties based on the tax payer's income.

Notably absent from the proposed legislation are two tax cut strategies that were hotly debated throughout the past legislative session: tax compression (where the school districts would cut their actual tax rates) and further decreasing the tax appraisal cap. Additionally, there is no mention of relief for renters.