Give me a (Tax) Break! Texans Get a Big One in 2024

It actually happened! Texas homeowners are recipients of a much deserved property tax break bestowed on them by the 2023 Texas Legislature. And it’s about time.

If you haven’t heard about or enjoyed the benefits by now, a 2023 tax relief bill passed by the Texas Legislature, and approved by Texas voters, promises to deliver the largest property tax cut in Texas history— approximately $18 billion.

According to a press release on Texas Governor Greg Abbott's website,

Texas homestead exemptions will rise to $100,000, senior homeowners will be protected from being priced out of their home, the small business exemption for the Franchise Tax will double, and Texas small businesses will be protected from excessive appraisal increases...For tax year 2023, this will save the average Texas homestead owner over $1,200. Texas homestead owners over 65 or with a disability will see over $1,400 in savings.

The Lone Star State unhappily ranks No. 6 in the nation in the burden its homeowners pay in property taxes - behind only three progressive New England states and tax-happy Illinois and New Jersey. (Without a personal income tax or a heavy sales tax, the politicians have to get their due from somewhere.)

How it Works

The biggest impact on Texas property owners' tax bills stems from an increase in the homestead exemption —the amount of money a homeowner can take off the value of their house (and primary residence) before it is taxed—for school districts…from $40,000 to $100,000. That’s significant.

However, depending upon where you live that savings can be offset in part by an increase in property assessments or the tax rate itself…or both. In short, the equation that determines the true tax a homeowner pays is the assessed value less the exemption – the taxable value – multiplied by the tax rate.

Apply, Apply, Apply!

Exemptions from property tax require application submissions under most circumstances. If you haven’t bothered to apply for that valuable homestead exemption (shudder) you’re paying much more than you should in property taxes. Such applications are filed with the appraisal district in which the property is located, generally before May 1. And the local appraisal district is solely responsible for determining whether a property qualifies for an exemption.

Qualifying for a homestead exemption on your principal residence removes part of your home's value from taxation; thus, lowering your taxes. For example, if your personal residence is appraised at $350,000, and you qualify for the $100,000 exemption mandated for school districts, you will pay taxes on the home based on $250,000.

Special Qualifications

For folks over 65 or disabled, the tax savings is even more weighty, assuming they ask for full exemptions to which they are entitled. To qualify for the age 65 homestead exemption, an individual must:

• Be age 65 or older,

• Have an ownership interest in the property, and

• Live in the home as his or her principal residence. 

For folks over age 65 or disabled, Texas Tax Code Section 11.13(c) requires school districts to provide an additional $10,000 residence homestead exemption. If the owner qualifies for both the $10,000 exemption for age 65 or older homeowners AND the $10,000 exemption for disabled homeowners, he or she must choose one or the other for school district taxes. An eligible disabled person 65 or older may receive both exemptions in the same year, but not from the same taxing authorities.

Once you qualify for a homestead exemption, or turn age 65 or qualify for a disabled exemption, your exemptions will renew automatically as long as you own the qualifying home and your qualifications have not changed.

Tax Breaks & Caps

On a slightly different but related topic, the property relief tax bill provides property tax breaks to those over 65 or who are disabled. Heretofore, their taxes were frozen at a given level. Texas Senate Bill 12 unfreezes the frozen value offering the opportunity for their taxes to actually go down every year instead of remaining the same.

Another less publicized benefit of the recent tax bill is that more small businesses are now exempt from paying a franchise tax to the state. The exemption limit was increased from approximately $1 million to $2.47 million. In short, a taxable entity whose annualized total revenue is less than $2.47 million is no longer required to file a "No Tax Due Report." Anything that reduces taxes AND  paperwork is always appreciated.

The measure also put an appraisal cap on residential and commercial properties and included a public school tax compression, reducing school districts’ maintenance and operations property tax rate by 10.7 cents per $100 of a property’s valuation

Not a bad way for Texas property owners to start out 2024!