What to Know About Texas Property Tax Relief Before Voting

Mark your calendar for November 7. That’s when state residents vote on the Texas Property tax relief package lawmakers agreed to last month. The compromise between Texas lawmakers, which came after many months of disagreement, includes an increased homestead exemption and property tax cuts for businesses and homeowners. If voters approve the deal, those exemptions and cuts will become effective this year.

“Today, we will deliver even more with over $18 billion in property tax cuts,” Texas Gov. Greg Abbott said in a July 13 statement regarding the property tax deal.

But are you wondering how much you might benefit from that $18 billion in tax relief? That depends on several factors. Here’s the breakdown of what’s included in the tax relief package.

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Sign up

Texas property tax relief for homeowners 

The property tax relief package includes tax cuts through compression (providing more funding to school districts so schools can cut taxes for homeowners), which was a priority for Gov. Abbott. Tax compression began in 2019, but if approved, the new tax deal would provide an additional savings of 10.7 cents per $100 valuation ($107 per $100,000 valuation). 

An increased homestead exemption, which was a sticking point for Texas Lt. Gov. Dan Patrick, also made it into the final deal. If voters approve the deal, the Texas homestead exemption will more than double, from $40,000 to $100,000. 

This could be helpful for some residents because it would mean an additional $60,000 of a property’s taxable value would be exempt from property taxes.

• The homestead exemption would be $110,000 for Texas homeowners 65 and older.
• Homeowners with disabilities would also be eligible for the $110,000 exemption, regardless of age.
• Approximately 5.7 million Texas homeowners would qualify for the homestead exemption.

Circuit breaker tax credit 

Homeowners and businesses may be eligible to claim a circuit breaker tax credit. That tax credit essentially limits how much property taxes can increase in a certain period in Texas. 

The credit would be available to non-homestead properties (properties that are not the owner’s primary residence) and would cap yearly appraisal increases at 20%. The program could provide tax relief for small businesses, which was a priority for Gov. Abbott.

• Properties valued at $5 million or more would not qualify for the credit. However, that number can change in future years, based on inflation rates.
• The circuit breaker credit would be available through the end of 2026, when lawmakers would consider whether the program should be extended.
• Homesteaded properties will still be subject to the 10% maximum increase under current law.

Unlike circuit breaker programs in most other states, the new Texas credit would not be based on income or age.  

Texas franchise tax

Texas already exempts businesses making less than $1.24 million from paying the state’s franchise tax. But one of the bills included in the property tax relief package would nearly double the exemption to $2.47 million. 

If approved, this legislation would eliminate Texas franchise taxes for roughly 40% of small and medium-sized businesses, according to state Sen. Paul Bettencourt (D-7), one of the Texas legislators who filed the bill. 

Texas property tax reform 

Also included in the tax relief agreement between lawmakers is a provision for voters to elect three officials to serve on a countywide appraisal board. These positions would be available to Texas counties with a population of more than 75,000. 

If this provision gains voter approval this fall, the first election will take place in May 2024. The elected officials would take office the following July. This is important because board members oversee property tax policies and budgets. 

When Texas property taxes will go down

The Texas property tax deal won’t decrease property taxes for Texans right away, even though Gov. Abbott has signed the bills. On Election Day, Nov 7, 2023, if the majority of Texans give their approval, homeowners could begin to see savings on 2023 property taxes, which will be reflected in their tax bills due in January. 

And given that nearly 90% of Texas voters approved the last round of property tax cuts (voted on in 2021), it is likely that Texas property tax relief will happen this year.