A deal that legislators and the state’s top executive are calling the largest property tax cut in Texas history will head to the state’s voters, who will decide whether to approve the $18 billion property tax reduction deal cut by legislators and endorsed by Gov. Greg Abbott.
Abbott said the property tax relief was made possible because of the state’s $32.7 billion budget surplus. The Texas governor specifically campaigned to use at least $13.5 billion of the record-high budget surplus to help bring down property taxes in the Lone Star State.
Abbott, in a Tweet, called the approved package “the largest property tax cut in Texas history.”
“I was proud to sign into law the largest property tax cut in Texas history. Working with the Texas Legislature, we secured over $18 billion in property tax cuts. Hardworking Texans delivered the largest budget surplus in state history. Proud to return more than half,” Abbott Tweeted on July 25.
The property tax cut package will be on the Nov. 7 ballot.
Abbott had called a second special session on June 27 and tasked legislators to eliminate property taxes statewide. The second special session closed with the legislator’s approval of the property tax package.
Reducing the property tax exposure for Texas residents comes at a time when the average sales price of a home has dramatically increased in the past few years.
The tax cut program, approved by the Texas House and Senate this week, would allocate $12 billion to reduce the school property tax rate for all homeowners and businesses. The school tax rate would specifically be cut by 10.7 cents per $100 of valuation, according to a legislative analysis of the tax cut package.
Texas homeowners will see their homestead exemptions permanently increase from $40,000 to $100,000. Homestead exemptions apply to Texas homeowners who own their own homes and gives them a property tax discount, currently up to $40,000 of the property’s value.
Homeowners who are 65 and older or disabled would see their homestead exemptions increase to $110,000. The homestead exemption increase applies to the state’s 5.72 million homeowners, according to the legislation.
Residential and business properties valued at $5 million or less and do not have a homestead exemption would earn a 20% cap on appraisal values, as part of a three-year pilot program.
The tax cut package comprises three bills:
- Senate Bill 2: increases homestead exemption to $100,000, buys down — or “compresses” — $7 billion worth of school property taxes, and sets a 20% on appraised values of non-homestead properties of $5 million or less;
- Senate Bill 3: franchise tax exemption for small businesses increased from $1 million to $2.47 million;
- House Joint Resolution 2: places tax relief packages on the November ballot.
Texas House Speaker Dade Phelan added the tax relief package also cut franchise taxes for small businesses and added three new elected positions to the boards of appraisal districts in counties with at least 75,000 people.
“Reducing property taxes, providing relief to small business owners and reforming our appraisal system will ensure economic growth and prosperity, and this agreement is a significant victory for all Texans,” Phelan said in a statement.
Lt. Gov. Dan Patrick added the approved legislation is retroactive for 2023, meaning Texas residents and businesses would see a reduction in their levy liabilities for this year, assuming a majority of voters support the $18 billion tax package in November.
Patrick, in an official statement, added the new $100,000 homestead exemption would result in a property tax savings of $1,250 to $1,450 on a home valued at the statewide average of $331,000 for 2023.