Texas homeowners have seen a dramatic increase in their property tax bills due to rising property values. Over the past decade, the median sales price of a Texas home was $326,800 up from $172,600 in 2013. This sharp increase in price has led to higher property values for tax purposes. For homeowners across Texas, higher property taxes place a burden on finances and for those on a fixed-income, these increases can be especially tough to manage.
After months of debate, in August 2023 Governor Abbot signed the largest property tax cut in Texas History into law. As the law requires a constitutional amendment, Texans will vote on the proposition on November 7, 2023.
What Does the New Law Mean For Property Taxes?
The proposed law will lower property taxes in four distinct ways:
(1) establishes a temporary limit on the maximum appraised value of real property other than a residence homestead
(2) increases the amount of the exemption from ad valorem taxation by a school district applicable to residence homesteads from $40,000 to $100,000
(3) exempts certain appropriations to pay for ad valorem tax relief from the constitutional limitation on the rate of growth of appropriations
(4) authorizes the legislature to provide for a four-year term of office for a member of the board of directors of certain appraisal districts.
- Establishes A Temporary Limit On The Maximum Appraised Value Of Real Property Other Than The Residence Homestead.
Currently, investment properties do not qualify for exemptions and thus have no cap on increased values. To protect those who own investment properties valued under $5 million and the tenants renting those properties, a temporary 20% appraisal cap on assessed value. It starts in 2024 and expires automatically in 2026.
This means that your local tax appraisal district can’t raise your appraised value by more than 20% (aside from any increases due to improvements you may have made to the property). Over the years, the compounded effect of this cap can result in hundreds or even thousands of dollars in savings.
- Increases The Amount Of The Homestead Exemption From $40,000 to $100,000.
This provision exempts $100,000 of assessed value from school district taxes. Your county may also have a local option exemption of at least $5,000 and no more than 20% of your home’s value (though this varies from county to county). You might also receive a $3,000 exemption if your county collects tax revenue for flood control or farm-to-market roads.
Since school district taxes often make up at least half of your property tax bill, this can result in significant savings. For example, suppose you have a $300,000 home in a city with a 1.2% school district tax, the increase in the homestead exemption will save you an additional $720 per year. The image below illustrates how the homestead exemptions works with the proposed exemption.
Average savings from this proposal is estimated at an average of $1,300 and an additional $170 per year for seniors and disabled Texas homeowners, according to the Texas Tribune.
- Use the state budget surplus to pay for property tax relief.
This component of the change to the law allows the legislature to spend state budget surplus funds to “buy down” property taxes. The primary focus of these funds will be to lower school taxes. By compressing the school tax rate by 10.7 cents per $100 property valuation property, owners will see their property taxes fall. School taxes are the largest component, often over half, of a property tax bill in Texas, and lowering the rate will help all property owners even those without exemptions. Proposition 4 puts more than $12 billion towards reducing the local school property tax rate for homeowners and businesses.
- Authorizes The Legislature To Provide A Four-year Term Of Office For A Member Of The Board Of Directors At Certain Appraisal Districts.
This part of the law will convert three members of any appraisal district board into elected positions. The idea is to give the public more participation in the operations and leadership of their County Appraisal District.
Protest Your Property Taxes to Get the Most Property Tax Relief
Exemptions and tax rate reductions are benefits applied after your final value is determined. So don’t forget to protest each and every year to make sure the value you are taxed on is fair. Protesting is your first line of defense in protecting yourself from unfair property taxes. Contact us today to see how easy fighting for the lowest possible tax bill can be.