Homeowners in the Lone Star State might have already noticed lower property tax bills this year, thanks to a Texas property tax relief package (Proposition 4) that became effective last year. 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. Texans approved the tax package last November.
In a statement released after lawmakers reached the deal, Texas Gov. Greg Abbott referred to the more than $18 billion in tax cuts as a "comprehensive, long-lasting solution to increasingly burdensome property tax bills."
But not every Texan has experienced the same amount of financial relief. How much you save depends on several factors. Here’s the breakdown of what’s included in the property tax cuts package.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free 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.
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 five years ago, but Proposition 4 provides 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. The Texas homestead exemption has more than doubled, from $40,000 to $100,000.
This is helpful for some residents because it means an additional $60,000 of a property’s taxable value is exempt from property taxes.
- The homestead exemption is $110,000 for Texas homeowners 65 and older.
- Homeowners with disabilities are also be eligible for the $110,000 exemption, regardless of age.
- Approximately 5.7 million Texas homeowners 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 is 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 do not qualify for the credit. However, that number can change in future years, based on inflation rates.
- The circuit breaker credit is available through the end of 2026, when lawmakers would consider whether the program should be extended.
- Homesteaded properties are still subject to the 10% maximum increase under current law.
Unlike circuit breaker programs in most other states, the new Texas credit is not based on income or age.
Texas franchise tax
Texas previously exempted 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 nearly doubles the exemption to $2.47 million.
The legislation eliminates 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 taxes in 2024
Texas homeowners saw impacts of the property tax relief package in January 2024, when they received their 2023 property tax bills.
Related Content
-
5 Types of Gifts the IRS Won’t Tax: Even If They’re BigGift Tax Several categories of gifts don’t count toward annual gift tax limits. Here's what you need to know.
-
The 'Scrooge' Strategy: How to Turn Your Old Junk Into a Tax DeductionTax Deductions We break down the IRS rules for non-cash charitable contributions. Plus, here's a handy checklist before you donate to charity this year.
-
IRS Says You Made a Tax Return Mistake? A New Law Could Help You Fight BackTax Law Updated taxpayer protections change what the IRS must explain on error notices and how long you have to respond.
-
5 Types of Gifts the IRS Won’t Tax: Even If They’re Big
Gift Tax Several categories of gifts don’t count toward annual gift tax limits. Here's what you need to know.
-
The 'Scrooge' Strategy: How to Turn Your Old Junk Into a Tax Deduction
Tax Deductions We break down the IRS rules for non-cash charitable contributions. Plus, here's a handy checklist before you donate to charity this year.
-
Are You Middle-Class? Here's the Most Tax-Friendly State for Your FamilyTax Tips We found the state with no income tax, low property tax bills and exemptions on groceries and medicine.
-
Social Security Benefits Quiz : Do You Know the IRS Tax Rules?Quiz Social Security benefits often come with confusing IRS tax rules that can trip up financially savvy retirees and near-retirees.
-
How Are I Bonds Taxed? 8 Common Situations to KnowBonds Series I U.S. savings bonds are a popular investment, but the federal income tax consequences are anything but straightforward.
-
Capital Gains Tax Quiz: How Well Do You Really Know IRS Investment Tax Rules?Quiz Take our capital gains tax quiz to test your investment taxes knowledge. Learn about loss rules, holding periods, and tax incentives that could impact your savings.
-
6 Tax Reasons to Convert Your IRA to a Roth (and When You Shouldn't)Retirement Taxes Here’s how converting your traditional retirement account to a Roth IRA can boost your nest egg — but avoid these costly scenarios.
-
Could Tax Savings Make a 50-Year Mortgage Worth It?Buying a Home The 50-year mortgage proposal by Trump aims to address the housing affordability crisis with lower monthly mortgage payments. But what does that mean for your taxes?
