By Leslie Rouda Smith
Proposition 1 does four things. First, it lowers property taxes by increasing the homestead exemption from $15,000 to $25,000. Second, it ensures senior Texans and disabled Texans get as much tax relief as possible. Third, it prohibits local governments from repealing or reducing any homestead exemption that may exist. And finally, it ensures real estate transactions will never be subject to a tax.
If Proposition 1 passes, when will I see tax relief?
Almost immediately! Thanks to the Texas Legislature’s action, your 2015 tax bill will include the increased homestead exemption.
How much will Prop 1 save me?
Every Texas homeowner will save more than $125 every year! Plus, should you ever decide to sell your home, Prop 1 guarantees that there won’t be a tax on that transaction … and that could be worth thousands of dollars!
For example, in Pennsylvania, consumers must pay a 2% transfer tax on any real estate sale. Here in Texas, where the average sales price is $266,000 (source: The Real Estate Center at Texas A&M University – recenter.tamu.edu), that tax would be $5,200—due at the closing table!
What is a “real estate transfer tax”, and why is banning them a good thing?
A real estate transfer tax is a tax imposed on the sale of a home, which adds another tax to the home selling and buying process.
Real estate transfer taxes can potentially lower property values and hurt the housing market. They are also technically a form of double taxation, as the buyer and seller will incur the cost of the tax in addition to the property taxes already on the home. It’s not fair, and banning them from Texas will ensure that permanently.
There are currently 36 states, plus the District of Columbia, that charge some sort of a real estate transfer tax.
Why do we need a constitutional amendment to do this?
First, the amount of homestead exemption is specified in the State Constitution, so that would need an amendment to change. Also, by banning real estate transfer taxes in the State Constitution, it prevents municipal governments from ever implementing them. But most importantly, making it an amendment puts the decision in the hands of the people. You are the ones who are going to be affected by this change – you should have the final say over whether it happens, not the politicians. With Prop 1, you have the choice to give yourself and other Texas homeowners more tax relief.