Texas eyes homestead exemption raise, property tax cut. How much could homeowners save?
Texas homeowners could save hundreds of dollars in annual school property taxes, building on the massive cuts lawmakers and voters approved in 2023, if a $22.7 billion state Senate priority proposal to again raise the homestead exemption becomes law.
Senate Bill 4 by Sen. Paul Bettencourt, R-Houston, would raise the state's homestead exemption for school district taxes — a portion of a home's value that is not considered when calculating annual bills — from $100,000 to $140,000 if authorized by Texas voters. Twenty-nine of the chamber's 31 senators have signed onto the largely bipartisan bill, which was swiftly passed out of committee Tuesday and advanced for full Senate consideration.
A related resolution, Senate Joint Resolution 2, would authorize a constitutional amendment election to permanently adopt the change. The Senate Committee on Local Government passed both proposals unanimously without amendments after a Tuesday morning hearing.
Under SB 4, the state would cover school districts' budgetary shortfalls arising from the increased homestead exemption, meaning public schools would not miss out on critical funding due to the property tax cuts.
A separate $3 billion provision in the Senate's draft budget bill, SB 1, would compress or "buy down" school districts' tax rates, potentially providing additional tax cuts to homeowners.
"By following up on the largest, grandest, hugest property tax reduction in American history, $22.7 billion to be exact, SB 4 and SJR 2 provide more meaningful reduction to Texas homeowners by raising the homestead exemption to $140,000," Bettencourt said in a celebratory news release Tuesday.
Lt. Gov. Dan Patrick, who presides over the upper chamber, designated SB 4 as priority legislation this session. Gov. Greg Abbott in his State of the State address last month declared property tax relief an emergency item.
With the 40% increase in the homestead exemption, Bettencourt estimates homeowners on average could save about $363 in school property taxes each year. Together with the proposed tax rate compression, Bettencourt said taxpayers would save even more.
"When you combine both the savings that will come through property tax relief on the state compression percentage and also the savings from the homestead exemption, the estimated savings is $496.57. That's $500, and that is significant," Bettencourt said during the hearing.
If approved, SB 4 would provide the largest homestead exemption ever adopted in the state, and it would be the fifth time the Legislature and voters have raised the exemption since 1997, when it was boosted from $5,000 to $15,000.
Texas voters in 2015 raised it again to $25,000, then again to $40,000 in 2022.
During the second special session of the 88th Legislature in 2023, a bipartisan majority of lawmakers passed SB 2 and SB 3 to raise the homestead exemption from $40,000 to $100,000 amid a historic state budget surplus. Voters approved the $18 billion property tax cut with 83% support.
Much of Texas' tax law, including the homestead exemption, is enshrined in the state constitution. Changes to the Texas Constitution require approval from two-thirds of both chambers of the Legislature and a majority of the state's electorate.
"Clearly, SB 4 is a big deal for Texas homeowners, and I look forward to seeing the overwhelming approval from the Texas Legislature and then the Texas voters. Tax relief is on the way,' Bettencourt said.
This article originally appeared on Austin American-Statesman: Texas Legislature eyes homestead exemption raise, property tax cut
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