There’s an $18 billion property tax cut package on the November ballot, and property owners are on the cusp of one of the biggest changes to the property tax code in generations. After facing incredible increases in property values in recent years, Texans have also seen increased property tax bills. But, combined with inflation, turbulent job markets, and—for many home-owning seniors—fixed incomes, the situation is untenable. The new laws offer to change that, in the form of thousands of dollars of savings for property owners over the next few years.
But, despite the savings, homeowners can further protect their finances by protesting their property taxes. By both harnessing the upcoming savings and making sure your property’s appraised value is an accurate reflection of the market, you can significantly lower your property tax bill. To do so, you need to know both what the new laws are changing and why they don’t alter the importance of protesting every year.
New Changes to Texas Property Tax Laws: What You Need to Know
In the summer of 2023, the Texas legislature passed a series of bills that would make significant changes to how Texans pay their property taxes. This November, voters took to the state ballot to vote yes or no on an amendment that will allow the legislature to put all of those approved measures into effect. The amendment passed, and these changes will even apply to 2023 taxes, giving many homeowners significant savings over what they otherwise would have paid.
Consider these three primary changes:
Changes to the Homestead Exemption: From $40,000 to $100,000
Homeowners can currently apply for a homestead exemption if they own a qualifying property as their primary residence. Homestead exemptions offer these benefits:
- A reduced amount due for school district taxes. In most counties, school district taxes are around 1%, or half of the total property taxes due. If you have a homestead exemption, the first $100,000 of your property’s value is removed from calculating the amount you owe for school district taxes.
- A taxable value increase cap. Appraisers calculate the value of homes every year, using a combination of new appraisals and algorithms. Depending on market conditions in your neighborhood, your home may appraise for an increase of 10, 15, or even 20% in a single year. But the exemption caps your home’s taxable value increase at 10%. (There’s a seemingly small but very significant detail here: your homestead exemption caps increases to your home’s taxable value, which is the number tax assessors look at to calculate your bill. It doesn’t impact your home’s appraisal value, which can climb steeply upwards if you don’t vigilantly protest your appraisal value every year.)
Related: What Is the Texas Property Tax Appraisal Increase Limit, and How Can It Save You Money?
For example, suppose you have a $325,000 home in a jurisdiction with a 1.10% school district tax and a 2% total tax rate. Without a homestead exemption, you would owe $6,500 in property taxes this year. With the new measures that passed in November, homeowners get a $100,000 exemption—your taxes decrease to $5,400 (with a savings of $1,100).
Changes to Assessment Value Increases: A 20% Cap for Non-Homesteaded Properties
However, not all properties can receive the benefits of a homestead exemption—only qualifying primary residences do. For all other types of properties, such as rental properties and second homes, there is no exemption or protective cap preventing sharp property value increases.
If a non-homesteaded property increased in appraisal value by 25% in a single year—as many Texas properties saw in the past few years—then the taxable value of the property will also increase by 25%.
However, the Texas legislature voted for a three-year pilot program that would extend a 20% cap on taxable value increases for qualifying non-homesteaded properties. This offers multiple benefits:
- Property investors and people with more than one home will save on property taxes because the cap will curtail steep increases in the property’s tax bill.
- The 20% cap also makes property tax payments more predictable. Lenders can more accurately estimate monthly funding into escrow accounts, and property owners won’t be as shocked by turbulent tax obligations.
- Tenants and property occupants also benefit. Increasing property taxes lead to increased rental rates, but lower increases in property tax obligations lead to lower rent hikes.
Changes to the Property Tax Protest Process: Voted-In Appraisal District Board Members
The two changes explained above have dominated the headlines for media sources and property owners who are excited about the significant changes. But there is a third positive change that homeowners should also be aware of.
When property owners protest their property taxes, the protest often culminates in a hearing in front of an Appraisal Review Board. This board will hear arguments from the county appraiser and the protesting property owner, and they will make the final decision on what the property’s appraisal value will be recorded as on the district roll.
Before the new law was approved, the appraisal district’s board of directors were all appointed members. The new legislation determines that three members are voted into their positions. This will ensure that there is a greater amount of public choice and engagement regarding the direction of the board of directors.
How the New Texas Property Tax Laws Affect Your Property Tax Bill
The legislature has already voted, and the property tax law changes had bipartisan support. General Texas voters have now voted to approve the amendment that allows the legislature to put those changes into effect.
What the new Texas property tax laws promise for the majority of homeowners and property owners across the state is a significant reduction in property tax bills.
- Homeowners with an active homestead exemption in place will save approximately $600 over what they saved with the previous property tax laws. The $60,000 exemption increase translates to $600 saved at a 1% school district tax rate.
- Non-homesteaded property owners will save any money they might have otherwise owed if their property’s value increases by more than 20%.
These savings will apply to your 2023 property tax bill. You can also expect to see money back from your escrow account or less money due every month in 2024 as part of your mortgage payment; chances are that your escrow account now has an excess of funds.
5 Reasons Why You Still Need to Protest Your Property Taxes Every Year
Despite all the benefits the new tax laws bring to the table for property owners across the state, it’s still important for property owners to protest their taxes every year. What exactly does it mean to protest your property taxes? The term is a bit of a simplification. You’re not protesting the tax bill itself; you’re protesting the appraised value of your property, which local tax assessors use to calculate your property’s taxable value and then calculate your property tax bill off of that. Here are six reasons you need to exercise your right to protest.
Reason #1: Homestead Exemptions Don’t Affect Your Home’s Appraised Value
Earlier, we discussed how a homestead exemption doesn’t affect your home’s appraised value—it only impacts the taxable value. This means that if your home is worth $300,000 this year and it increases 20%, the appraised value is $360,000 but the taxable value caps at $330,000. If it’s 20% again the following year, the appraised value is $432,000 and the taxable value is capped again at $363,000.
Related: Ultimate Guide To Proposition 4 And How The New Texas Property Tax Laws Will Lower Your Property Tax Bill
If your home is sold, inherited, or simply loses its exemption at any point, the value skyrockets all the way to that $432,000 and can’t be lowered back down. The only way to keep the appraised value in check is to monitor it and protest it every year.
Reason #2: Property Appraisals Can Still Be Inaccurate and Unfair
The property tax changes don’t address any potential flaws in the property appraisal process carried out by local governments. It’s still possible for appraisers to not see easements that affect your property, not realize that the seemingly comparable properties they’re using to adjust your property’s value aren’t truly comparable, or simply make mistakes.
Reason #3: The 20% Cap Is Just a Pilot Program
The new 20% cap for non-homesteaded properties is a tremendous relief for many people, but it’s not permanent. The program is currently scheduled to last just three years, at which point it may be up for review to renew or extend—or it might be permanently ended. If you take the tax savings from the cap but let your focus on the calculated appraisal value wane, then you might be caught off-guard if your tax bill in Year 4 is based on that uncapped value.
Reason #4: Protesting Property Taxes Every Year Methodically Lowers or Reins in Your Property Tax Bill
When you protest your property’s appraised value, you’re keeping one hand on the wheel. You or your appointed representatives can investigate the rationale behind the newest appraisal value, address any mistakes that you think may have caused it, and present an argument to the review board. Even in years when they don’t accept your countervaluation, you may receive a compromise or a partial reduction.
Reason #5: Get Peace of Mind in Knowing You Have the Lowest Possible Tax Bill
Some years, you may not receive any compromise, and the review board might maintain the appraisal value originally determined by the county appraiser. When this happens, you have the peace of mind of knowing that you did everything you could to reduce it and didn’t leave any money on the table. Just be sure you protest the next year instead of giving up on the process.
Don’t Rely on Just the Upcoming Changes—Protest Your Property Taxes with Expert Help
You need to protest your property taxes every year, but you don’t have to do it alone. At Home Tax Shield, we can file your protest form, represent you during conversations with the central appraisal district and during official hearings, and fight for your right to the lowest possible tax bill. Our process makes it simple for you to sign up, and then we do all the work for you every year. Sign up today to combine the new property tax savings with savings from a fair home appraisal value.