How the New Texas Property Tax Legislation Will Impact Your Property Tax Bill

Early in July 2023, the Texas state legislature finalized its property tax cut package. These sweeping changes drastically increase property tax relief for property owners, many facing skyrocketing property tax bills because of increased values. 

For months, the House and the Senate have proposed numerous strategies for spending surplus revenue and addressing the growing property tax burden on homeowners. While this series of bills, which promises an $18 billion tax cut for eligible property holders, has been approved by the government, it won’t be set in stone until voters pass it in this November’s election. 

Whether you’ve been paid sharply increasing property tax bills for years or you’re newly facing the deadline for 2023 property taxes over the coming months, these bills will significantly alter your payments. Get caught up on the latest developments. We’ll quickly explore the unique aspects of Texas’s property tax system before zeroing in on the coming changes and the steps you can take to ensure you reap the benefits of the new legislation.

The Texas Legislature Passed New Property Tax Laws

The property tax relief comes in three bills that will trigger these actions:

  • Texas has a budget surplus of approximately $32.7 billion for 2023; these bills allocate $12.6 billion for property tax relief.
  • Eligible homeowners with a homestead exemption will receive a $100,000 exemption instead of the current $40,000.
  • Seniors and disabled homeowners will receive additional exemptions.
  • Small businesses, commercial property owners, and non-homesteaded property owners will see property tax savings as part of a pilot program that caps property value increases at 20%.

However, these measures have left lingering questions. While the current surplus will cover the difference in public school spending due to the reduced property taxes, there is no long-term plan for subsequent years or a plan to increase school funding. Many businesses are also concerned about the changes, as they may face a more significant tax burden—their collective share of school property taxes will increase by 3% from 52% to 55%.

Related: Homeownership in Texas: Mortgage Payments, Taxes, and Home Values

However, property owners and members of the state legislature are optimistic that these measures will pass in the general election and give homesteaders the tax relief they need. If passed, the measures will also retroactively apply to 2023 property taxes, which could have significant implications for your property taxes immediately.

The Fundamental Background on Texas Property Taxes: What You Need to Know

Texas property taxes are a significant source of revenue across the state, partly because Texas doesn’t have a state income tax. Instead, property and sales taxes fund the majority of city, county, and state budget requirements, covering everything from school districts to emergency services and road development. 

This rate incorporates the city, county, school district, and junior college tax levies established by each tax jurisdiction across the state. Because the taxes are set, managed, and collected locally, different residents have different tax bills; a homeowner with a $400,000 property in Collin County will see a higher tax bill than a homeowner with a $400,000 home in Anderson County.

Texas residents face one of the highest property tax rates in the country, which many counties having a property tax rate above 2%. Approximately half of that rate is dedicated to school district taxes, with the responsibility for funding schools split almost evenly between commercial and residential property owners. 

The Texas Comptroller and the legislature have established tax relief measures for homeowners called exemptions. Under these measures, a particular portion of a property’s appraised value is removed from property tax calculations. Most exemptions apply to the school district portion of the total taxes due.

The Laws Currently in Place and Their Problems: Why the Legislature Had to Make a Change

Texas’s high property tax rates were particularly difficult for homeowners during the recent surge in the Texas real estate market. Even residents who didn’t buy or sell a home saw their property’s appraised values skyrocket due to activity in their neighborhoods and the sharp increases in property value of comparable homes. But, while the scale of the issue was unprecedented, this is not a new problem—Texans have historically seen high property taxes. Over the past several years, the legislature has voted to increase the exemption from $15,000 to $25,000 in 2015, to have another increase to $40,000 around 2021, and now the most significant increase yet: from $40,000 to $100,000. 

A hot-button complication for the property tax issue is the tax relief given to seniors. Disabled homeowners and homeowners over age 65 are eligible for a supplemental exemption of $10,000. However, rapidly increasing property values and the resulting tax increase were particularly hard for seniors and disabled homeowners on a fixed income to pay. Long-term Texas residents and newcomers are facing property tax bills they simply can’t pay.

A Quick Overview of the Approved Changes

Eligible homeowners with a homestead exemption receive a $40,000 exemption on school district taxes. A homeowner with a $400,000 home and a 2% total property tax rate with a 1% school district tax reduce their bill from $8,000 to $7,600. That’s a savings of $400. An over-65 homeowner would see a savings of $500.

However, under the approved legislation, the savings increased dramatically. That same homeowner would see a savings of $1,000, bringing their bill down from $8,000 to $7,000. Senior residents benefit from an additional increased savings of roughly $170.

Even residents not qualifying for a homestead exemption will see direct benefits. Currently, only homestead properties have a protective ‘cap’ on appraised value increases; it can only increase by 10% (unless the owner has made appreciable upgrades to the property). 

Related: Navigating the Complexities of Property Tax Exemptions in Texas: A Real Estate Agent Perspective

With the passed bills, commercial and non-homestead properties will benefit from a 20% cap in value increases. So if a resident has a second home, such as a summer home or a rental property, the property value cannot grow more than 20% higher for taxation purposes.

The Bigger Impact on Texas Property Owners

While the direct savings and benefits are clear, there are more significant implications—both positive and negative—that everyone should consider:

  • Where will revenue for city, county, and school district funding come from? This question must be answered every year until a permanent solution is introduced.
  • Your monthly mortgage payment will likely go down. If you have an escrow account, your lender collects a portion of your anticipated property tax obligations monthly. Under the current provisions and the above scenario, the owner of a $400,000 house with a $7,600 tax bill pays $633.33 monthly. But with the passed changes, the property tax portion of the mortgage shrinks to $583.33.
  • Staying on top of your property’s exemptions is more critical than ever. While non-homestead properties may soon receive some tax relief, the benefits of a homestead exemption are clear.

How to Make Sure You Benefit From These Changes

However, these changes aren’t a guarantee just yet. While the legislature has approved the bills and is ready to move forward, the whole plan is being put to a vote in November. If you’re excited about these changes and want to do what you can to make sure you benefit from them in the current tax year and the future, there are two steps you need to take:

1. Vote!

Voters will be deciding whether these measures go into effect. If they pass the vote in November 2023, the savings will apply to 2023; county tax offices will revise the bills they send out in October. 

2. Make Sure Your Home Has a Homestead Exemption

To maximize your savings, check your property record and be sure you have applied for all the exemptions you qualify for. This includes the homestead exemption, exemptions for disabled residents and residents over 65, the disabled vet exemption, and the ag exemption.

Additional Steps You Can Take to Lower Your Property Taxes: Protesting Your Property Taxes

While exemptions curtail costly property value increases and protect part of the appraised value from tax calculations, ensuring the appraisal is correct is still important. Every year, your local appraisal district will post a new appraised value for your home based on the characteristics of the property and the value of comparable homes near you. But if you think the appraised value is too high, you can protest it.

By filing a protest form, you or a representative on your behalf can present evidence and argue down the appraised value of your property. Taking this step can significantly decrease your property taxes each year.

Stay Ready for 2023 and 2024 Property Taxes With Help From Home Tax Shield

Texas property taxes have seen a lot of changes in the past several years, and with the current legislation, they’ll undergo even more changes this November. At Home Tax Shield, we’re here to help homeowners stay on top of the changing situation and manage their property tax protests. Reach out today to get started for the upcoming tax year, and stay informed about the latest legislative changes.

Stop overpaying your property taxes. Trust Home Tax Shield to help you keep more of your own money.

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