What to Know About Texas Property Tax Relief

The Texas property tax relief package is now official. Here's what voters approved of and who will benefit from the new law.

A large housing development near the suburban community of Arcola Texas located about twenty miles south of downtown Houston
(Image credit: Getty Images)

Voters have approved the Texas property tax relief package (Proposition 4) lawmakers agreed to over the summer. 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. Now that Texans have approved the measure, 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 statement regarding the property tax deal.

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

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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 the new tax deal will 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. Since the deal is now official, the Texas homestead exemption will more than double, from $40,000 to $100,000. 

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

  • The homestead exemption will be $110,000 for Texas homeowners 65 and older.
  • Homeowners with disabilities will also be eligible for the $110,000 exemption, regardless of age.
  • Approximately 5.7 million Texas homeowners will 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 will also be available to non-homestead properties (properties that are not the owner’s primary residence) and will 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 will not qualify for the credit. However, that number can change in future years, based on inflation rates.
  • The circuit breaker credit will 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 will 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 will nearly double the exemption to $2.47 million. 

The newly approved legislation will 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. 

When Texas property taxes will go down

Now that voters have approved the property tax deal, homeowners could begin to see savings on 2023 property taxes, which will be reflected in their tax bills due in January 2024. 

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Katelyn Washington
Tax Writer

Katelyn has more than 6 years’ experience working in tax and finance. While she specializes in tax content, Katelyn has also written for digital publications on topics including insurance, retirement and financial planning and has had financial advice commissioned by national print publications. She believes that knowledge is the key to success and enjoys helping others reach their goals by providing content that educates and informs.