Texas property tax law changes every few years. See the latest posts for the most up-to-date information.
The real estate market in Texas is blowing up this year. With a booming market, property values have skyrocketed, and property taxes are expected to increase. When county appraisal districts(CADs) released this year’s home appraised values, most homeowners were in for a shock. As per the Texas Association of Appraisal Districts, property values rose 20-50% or more statewide. For example, property values in Travis County increased by a whopping 56%.
Property taxes have been steadily increasing over the last couple of years which has hit homeowners hard. These high taxes come from the booming housing market and Texas’s high dependence on homeowner taxes. More than 40% of Texas’s local and state taxes come from properties. The state has no income tax, so to supplement funding of various public projects, Texas institutes higher property taxes than most other states.
Even though higher property values don’t always mean higher taxes, the increase in home values across Texas has set a stage for increases in property taxes in the next few years.
Many homeowners are already lamenting how they can no longer afford their homes because of the constant tax increase. In fact, 70% of Texas homeowners termed property taxes a major burden in a Texas Public Policy Foundation study.
Unfortunately, lowering property taxes in Texas is no easy task. After all, the state relies on these taxes to fund projects that the public needs, like public schools, roads, police departments, fire stations, and libraries. The only way to significantly lower these taxes would be to cut off these services or increase other taxes, such as sales tax— not something the public would favor for obvious reasons.
However, Texans voted in two amendments this year that will give homeowners a slight break from taxes levied on properties. Let’s look at these amendments and how they benefit Texas homeowners.
Proposition 2
Proposition 2 was an amendment bill passed in early 2022 on May 7, with as many as 85% of Texans in support. The amendment sought to increase the homestead exemption from $25,000 to $40,000.
The homestead exemption is the amount of a property’s value in dollars exempt from taxation. This exemption only applies to property that is the property owner’s primary residence and is available in all school districts.
Although property taxes are expected to skyrocket this year, an increase in homestead exemption is a welcome break for most property owners. Before the increase, homeowners with a $450,000 property eligible for the $25,000 exemption would only pay taxes on $425,000 instead of $450,000 of their home’s value. After the passing of Proposition 2, homeowners will now pay taxes on $410,000 of their home value.
Generally, this new amendment will save homeowners about $175 per year. It might not be much, but it does put a small dent in what they owe local taxing authorities.
Proposition 2 went into effect immediately and applied retroactively to January 1, 2022. Although passed in May 2022, eligible homeowners can apply for the homestead exemption for their 2022 property taxes.
Related: What is a Property Tax Exemption?
Proposition 1
Proposition 1 was another amendment passed on May 7, 2022. Like Proposition 2, Proposition 1 also focused on reducing the property taxes for select Texas property owners. This amendment sought to adjust and lower taxes paid towards public schools by homeowners with disabilities and those 65 years and above.
Proposition 1 resulted from a previous bill (House Bill 3) passed in 2019. This bill allocated more money to public schools, essentially buying down school property taxes. With the bill in place, school districts started reducing their tax rates. In turn, homeowners paid lesser taxes with the tax rate compressed.
However, the rate compression did not apply to people with disabilities and those 65 years or older. Why?
According to Texas laws, the taxes you pay towards public schools freeze when you become disabled or turn 65. This means people with disabilities and those 65 years and older did not enjoy the tax relief that came with the rate reduction.
The passing of Proposition 1 means people 65 years or older and those with disabilities can enjoy lower taxes when the amendment comes into effect on January 1, 2023. With Proposition 1 in place, this category of homeowners can expect to save between $110 in the first year (2023) and $124 in the second year for a $300,000 home.
It’ll Take More Reforms to Make Texas Property Taxes Affordable
Texas still has a long way to go before providing significant tax relief to property owners. However, these two amendments can help homeowners reduce their tax bills, even by a small margin. In May this year, Governor George Abbott reaffirmed his dedication to reducing property taxes by using the state’s surplus to reduce the property taxes homeowners owe. However, this method is not a sure bet and may take longer before it’s even introduced as a bill.
If Texas used the surplus of almost $24 billion to cover property taxes, the tax rates could be compressed to zero percent, providing relief to most Texans. The surplus would cover school district maintenance and operational taxes since they are the highest percentage of local property tax homeowners contend with.
More Ways to Reduce Your Tax Bill
On top of these two reforms, homeowners can use exemptions to lower their property taxes. There are several existing exemptions, including Ag, senior citizen, veteran, and disability exemptions. Aside from exemptions, property owners in Texas can also take advantage of property tax protests to lower their tax bills.
Protesting Texas property taxes involves an administrative process where you provide a counter-assessment of your property value. The goal is to get the county appraisal district to appraise your home fairly and reduce your property taxes. Protesting property taxes can be arduous, but it can help reduce your home’s appraised value by 3-5%. If you protested each year, you would realize huge savings in the long term compared to if you failed to protest.
Learn more about how you can lower your property taxes in Texas by contacting Home Tax Shield today.