Proposition 4 was an $18 billion tax cut measure that the Texas legislature approved in the summer of 2023 and which voters approved in November. This measure was extremely popular—not only did it cut school district tax obligations for homeowners by leaning on excess state revenue, but it also introduced several long-term mechanisms that homeowners could use to stabilize and even lower their property tax bills. This measure arrived right as homeowners across the state were struggling with steeply rising property tax bills.
However, reaping the benefits of Proposition 4 isn’t as simple as just seeing your property tax bill go down this year. Homeowners need to plan for the avenues of tax relief the proposition allows for. By understanding the changes introduced, you can maximize the benefits of existing tax relief mechanisms like exemptions, taxable value caps, and annual property tax protests.
Rising Property Tax Bills Made Homeownership Untenable for Many Texans
Starting around 2019 and 2020, homeowners in popular metropolitan areas and surrounding towns faced an unprecedented increase in market value for their properties. This was great news for home sellers who could suddenly sell their properties for tens or even hundreds of thousands more than the original purchase price. However, this was disastrous news for homeowners who wanted to keep their homes. The rapid rise of market values translated to a similar increase in their home’s assessed value, which in turn increased their property tax bills.
The median property tax bill in Texas during the middle of this market growth was $2,275. That high expense (which equates to around $200 added to your mortgage each month) was after considering tax relief like homestead exemptions.
For many homeowners, available channels weren’t enough to stabilize increases in taxes or keep their homes affordable. They were faced with selling their long-term home because they couldn’t afford it anymore. This phenomenon was particularly hard on seniors and other homeowners living on a fixed income, especially as it coincided with rising grocery prices and an uncertain job market.
Existing Property Tax Relief Measures Weren’t Enough
Before Proposition 4 was passed, there were two main strategies homeowners could use to reduce their property taxes: filing for exemptions and protesting their property’s taxable value each year.
Related: Deciphering Taxes: What to Know About Falling Values in Texas
Texas has had a long history of establishing homestead exemptions for qualifying homeowners. The homestead exemption provided two key benefits. First, it removed a portion of the home’s record value from calculating school district taxes. For most jurisdictions, school district taxes are around 1.25% (or slightly more than half of the total tax rate), so the savings were significant.
This exemption has increased over time, being $15,000 just a handful of years ago and increasing to $40,000 from a 2022 vote. That $40,000 exemption saved qualifying homeowners around $400 a year—a significant but insufficient amount. With supplemental exemptions, such as an over-65 exemption, the savings increased slightly more.
Second, homestead exemptions granted qualifying homeowners a 10% cap on annual increases in their home’s taxable value. For example, if a home had a $100,000 taxable value one year, it couldn’t increase to more than $110,000 the following year unless the homeowner made improvements on the property. Even if the appraisal value increased to $150,000, the taxable value would remain capped.
The other strategy available to property owners was an annual property tax protest. Every spring, homeowners could protest their home’s appraisal value if they thought it was inaccurately calculated or unfairly high. This route is still available, and with current market fluctuations, it’s an even more powerful tool.
The Government’s Answer: Prop 4—Higher Exemptions, More Caps, Lower Taxes
That was the status quo before Texas passed Proposition 4. Homeowners could file for a homestead exemption if they were eligible and see around $400 in annual savings, and they could argue down their home’s appraisal value through a property tax protest. Proposition 4 expanded on these tax relief strategies and allowed for an overall reduction in collection for school district taxes.
Here are the core benefits included in the new tax relief laws:
- A bigger exemption: The exemption increased to $100,000 for all homeowners with a homestead exemption. Instead of saving around $400 a year, homeowners now see closer to $1,000–$1,250 in savings.
- More taxable value increase caps: Homeowners with a homestead exemption still receive the benefit of the 10% cap. However, in previous years, only those homeowners had that form of tax relief. Now, property owners in general have a 20% taxable value increase cap for qualifying non-homestead properties. This means second homes, vacation properties, and real estate investment properties (provided they’re under $5 million in value) will only see their taxable values increase by a maximum of 20%. Commercial and mineral properties are also included under this new provision.
- School district funding: The lion’s share of property tax bills goes to school districts. In most counties, school district taxes account for at least half the bill. But Proposition 4 allocated $7.1 billion of the state’s excess revenue to school districts. This tax “compression” lowered school district taxes by approximately “10.7 cents per $100 of property value.”
There were also smaller benefits wrapped into the bill, such as most districts now having to elect three members of their appraisal district committee, the elimination of the franchise tax for more businesses, and other savings opportunities. For most homeowners, the biggest benefits are in the extra $600 of savings through homestead exemption, the 20% cap for previously uncovered properties, and the reduction of anticipated tax revenue demand.
How You Can Access the New Tax Relief Options Under Proposition 4
These benefits are important for homeowners who have seen their property tax bills become uncomfortably high. But aside from the school district tax compression and the 20% cap on non-homestead properties, these benefits aren’t automatic. Instead, there are a few steps you have to take to access them. There’s also one strategy that recent tax measures didn’t change: annual property tax protests—and they’re more important than ever.
Related: A Texas Homeowners’ Guide to Protesting Taxes: A Step-by-Step Approach
To gain more control over your property tax burden, focus on these four strategies.
File for Your Homestead Exemption
This step is one of the easiest, and it offers a very high reward. If you qualify for a homestead exemption, file the paperwork and make sure it’s in place as soon as possible. Once you have an exemption, you won’t lose it unless you become ineligible, and you don’t have to refile each year. The homestead exemption reduces your school district tax obligations and stabilizes the increases in your home’s taxable value over time.
Monitor Your Records to Make Sure the Taxable Value Caps Are in Place
Visit your central appraisal district website to review your property’s profile. This page tells you information like your home’s appraisal value over the past several years, your home’s taxable value, and the individual levies (and their rates) included in your property tax bill. It also displays which exemptions are on your property.
Try to review this record at least once a year to make sure everything looks right. You can also double-check the math on rising property value rates to see whether they comply with the new caps and that the county didn’t accidentally make a mistake.
Protest Your Property Taxes Every Year
In the spring of every year, property owners can protest their home’s appraisal value. This strategy is available to homeowners, property investors, and commercial property owners. Because your appraisal value has downstream implications for your taxable value and ultimately your property tax bill, it’s important to keep this number in check. Exemptions don’t affect it, so you should review it and protest any unfair or poorly calculated increases each year.
This process is complex, but it can give you significant savings in your taxes, especially if your properties aren’t eligible for exemptions. Every spring, you can file the notice, offer evidence that supports your claim, and then present arguments to an appraisal review board (ARB) during a formal hearing.
Work With Professionals Who Keep Their Pulse on Property Tax Trends
If you don’t want to handle the property tax protest process personally, you can have a representative do so on your behalf. Property tax services can file the paperwork for you, gather evidence to support the right appraisal value, and represent you in hearings. As a result, you can take this hefty to-do off your task list, both this year and in subsequent years.
Pay Fair Taxes Under the New Laws With the Help of Tax Experts
Proposition 4 goes a long way in making property taxes more affordable for Texans, but it doesn’t take care of everything. At Home Tax Shield, we can help homeowners protest their property taxes and address where Proposition 4 didn’t go far enough. Sign up today to have a professional team protest your home’s property taxes every year and maximize savings.