Answering Your Questions About The Biggest Property Tax Break in Texas History

April brought us the news that the Texas House and Senate had finally come to terms and passed the promised property tax relief we have been hearing so much about. I was thrilled, of course, though the state did not go as far as I think it should have.

Still, on the surface, this legislation — if passed by both Gov. Greg Abbott and in a November statewide referendum (and I feel safe in saying that I do not know one Texan who would vote against it) — could provide sorely needed tax relief to homeowners and tenants. North Texas rents have escalated sharply in the past few years, and property taxes are a major part of those escalations.

Texas Citizens Still Have to Vote on The Property Tax Reform Package in November

I had many questions, so I called up State Sen. Paul Bettencourt‘s office after receiving his press release since he is a major author of the bill and a cheerleader for property tax reform. David Clark (a committee director in his office) answered a few.

• When does the property tax cut start? It’s retroactive to Jan. 1, 2023, I was told. We will see the results of the new, lower rates on our fall tax bills.
• The tax breaks and changes to the state property tax code will only become effective after a November referendum vote: The Texas constitution requires these changes to be voted on by the citizens on November 7.

Homestead Exemptions Are Now $100,000/$110,000

• The gift: every Texas homestead exemption for school district property taxes will be raised to $100,000 ($110,000 for seniors and disabled). Lt. Gov. Dan Patrick insisted on this measure. Before this tax reform, the exemption was $40,000. If you don’t understand the exemption, think of it this way: it lowers the amount of your property’s valuation that you pay tax on. School boards may not, now, tax the first $100,000 (or $110,000) of your property valuation. To obtain this gift, you must own the property and it must be your full-time, principal residence. An applicant is required to state that he or she does not claim an exemption on another residence homestead in or outside of Texas.
• SB 2 will have $7 billion worth of MCR compression for school taxes. Compression means the state is picking up the tab (or buying down) the property taxes you are not paying with our tax surplus.
• Non-homesteaded real property valued at $5 million and under will receive a 20 percent “circuit-breaker” on appraised value increases as a three-year pilot project.

Pilot ‘Circuit Breaker’ Bill Offers Tax Relief For Landlords, Small Business Owners

• A “circuit breaker” is a targeted property tax reduction program that operates like an electric circuit breaker: it cuts off the flow of electrical current before an electrical surge can cause damage. Tax circuit breakers exist in many states, and aim to protect homeowners who cannot pay property taxes because of a hardship. Of course, many of these states also have income taxes while Texas does not. Policymakers can target circuit breakers to people who have the most difficulty paying property taxes and reduce their tax liability to a manageable level. Because of this focus, circuit breaker programs cost far less than across-the-board tax cuts
• With the Texas circuit breaker, commercial properties of $5 million or less will enjoy a 20 percent cap on appraisal increases for commercial and non-homesteaded properties. The idea behind this was to give small businesses and landlords a well-needed break.

More “Taxpayer Gifts”

• State senators Bettencourt and Tan Parker (R-Flower Mound) doubled the franchise tax exemption. This means an estimated 67,000 Texas businesses will no longer be paying a franchise tax. They also eliminated a “nuisance tax” or pesky procedure for the 1.7 million taxpayers who file the “no-tax-due forms” on franchise taxes even though they know they owe no tax.
• Appraisal review board members: If you have ever protested your taxes on your own, you have sat in front of a “citizen panel of peers” deciding your case. Did you know they are all appointed? Well, some of that panel will now be elected. In counties with populations of more than 75,000, three of the appraisal district’s nine directors must be selected from a ballot at general election time. The remaining five will still be appointed.

I love what Dick Lavine, tax analyst for the progressive Every Texan organization told The Dallas Morning News: “People likely to run for the elected slots on the board are probably going to be more interested in reducing values than the nuts and bolts of running a district …”

Music to my ears.