Following the Texas Senate’s unanimous passage of House Joint Resolution 2, Property Tax Relief, by Sen. Paul Bettencourt, R-Houston, many questions have been asked by Texans how this would affect them if passed during the November 7 amendment election.
Lt. Gov. Dan Patrick issued a statement following its approval, “The Senate unanimously passed House Joint Resolution 2, the final piece of the largest property tax relief package in Texas history, and likely the world. House Joint Resolution 2 authorizes a constitutional amendment election in November to allow for the provisions of Senate Bill 2 to be implemented. The impact of the $100,000 homestead exemption and the school district tax rate compression will be retroactive for the 2023 tax year to make sure Texans get maximum relief this year.
“Texans should take note of the November 7, 2023, constitutional amendment election date so they can vote in favor of this historic tax relief and several other key measures for the future of our state. In 2021, Texas voters enthusiastically approved the constitutional amendment to increase the homestead exemption to $40,000 and I have complete confidence they will do the same this year to increase the homestead exemption to $100,000.”
House Joint Resolution 2, by Sen. Paul Bettencourt, is the resolution that creates a constitutional amendment election for voters to approve the provisions of Senate Bill 2. If voters approve House Joint Resolution 2, a $100,000 homestead exemption would be permanently codified in the Texas Constitution, as well as create the 3-year pilot program for a 20% circuit breaker on non-homestead properties valued at $5 million or less, allow for the spending of state dollars for school district property tax rate compression without counting against the spending limit, and create local elections of 3 appraisal district board members in counties with a population of 75,000 or more.
If approved, the impact of the $100,000 homestead exemption and school district tax rate compression will be retroactive for the 2023 tax year resulting in a tax cut of $1,250 to $1,450 for a homeowner living in the statewide average home valued at $331,000.
A $12.7 billion package of property tax cuts goes before voters later this year, promising to deliver savings to millions of property owners in Texas suffering from skyrocketing tax bills.
Gov. Greg Abbott signed the legislation creating the cuts in August, officially closing months of negotiations among the state’s top Republicans.
If approved, this allow the state to spend billions in taxpayer money mainly collected from Texans during the past two years to pay for the massive cuts. If approved, an outcome that seems likely given voters’ support of tax cuts in the past, the changes would be applied for the 2023 tax bills due in January.
There are five key parts to the tax-cuts package and they are as follows: School tax compression, about $7.1 billion would be sent to Texas school districts so they can lower the taxes they levy on property owners. The move, known as “compression,” would reduce school districts’ maintenance and operations property tax rate by 10.7 cents per $100 of a property’s valuation. The M&O tax, as it’s known, helps pay for public education costs like teacher salaries and school building maintenance and makes up the largest chunk of most property owners’ tax bill.
The $100,000 homestead exemption, an estimated $5.6 billion would be used to more than double the current $40,000 property tax exemption available to all Texans who own the home that serves as their primary residence.
A homestead exemption is the amount a homeowner can take off the value of the house they live in before it is taxed. For example, the owner of a $350,000 home is being taxed at $310,000 under the current exemption for most homeowners. The same house would be taxed only on $250,000 under the homestead exemption approved this year.
A temporary 20% appraisal cap, the law would establish a limit on appraisals for commercial, mineral and residential properties that do not have a homestead exemption and are valued under $5 million. Texas counties’ appraisal districts would not be allowed to increase the taxable value of any of those properties by more than 20% each year, for the next three years. The program would end in 2026 unless lawmakers and voters decide to continue it.
Franchise tax exemptions, the legislation which is not a property tax cut but was included in the package as another tax relief measure would double the amount of money a business can make before it’s required to pay the state’s franchise tax, which is levied on larger entities doing business in Texas. That limit would go up from $1.24 million to $2.47 million. In addition, businesses that don’t meet the new threshold for having to pay franchise taxes would no longer be required to file forms to report those taxes.
Elected appraisal officials, county appraisal districts are currently appointed positions and can vary in size, with a typical board having about nine members. Under the new legislation, each appraisal district’s board of directors will now include three positions elected by a majority vote at a county general election for four-year terms.
If the changes in the tax code that require voter approval are approved, they would mostly go into effect automatically with no action required by property owners.
The changes to the franchise tax code, the 20% appraisal cap and the M&O tax rate compression would all show up on tax bills and require no special action.
Owner-occupied properties that already have a homestead exemption would also see that benefit automatically increase from $40,000 to $100,000 with no action required.
However, if a homeowner lives in their home and hasn’t gotten the homestead exemption, they need to apply for it through their county’s appraisal district office. In most cases, the exemption can be retroactive up to two years. Once a homeowner has the exemption, they do not need to reapply for it every year; it stands until the homeowner no longer lives in the home.
In addition to the new $100,000 exemption, Texas homesteaders with disabilities and those 65 and older will continue to qualify for the extra $10,000 exemption they are already allowed to receive for a total exemption of $110,000.
The new law also addresses an issue that cropped up when the exemption was raised from $25,000 to $40,000 in May 2022.
Texans 65 and older and those with disabilities, many of whom are on fixed or limited incomes, have had their school property taxes frozen for many years to protect them from rising tax rates and property values. Because of the way the $40,000 exemption increase was written, those homesteaders did not benefit from the higher exemption when voters approved it last year.
If the constitutional amendment passes, it would provide money for those homeowners who lost out on tax savings last year due to their frozen taxes and it would ensure they benefit from any future exemption increases that might lower those taxes.