The Texas property tax war between Gov. Greg Abbott and Lt. Gov. Dan Patrick continues — and $17.6 billion in Texas tax relief is on the line. Abbott promised big property tax cuts for Texans. Lawmakers have not come to an agreement yet, but reportedly, Abbott may be willing to compromise.
Each side’s proposed property tax plans cut taxes, but how Texans could benefit will depend on the type and amount of property owned. After all, you can only take one residence property homestead exemption (aka property tax deduction for your primary residence) in Texas.
“I have been crystal-clear that taxpayers deserve to receive the largest property tax cut in Texas history, and SB 1 delivers on that promise sustainably and responsibly,” Lt. Gov. Dan Patrick said in a statement issued after the Texas Senate unanimously passed its bill.
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Abbott released a statement after the Texas House passed its version of property tax relief. “It provides more cuts to property tax rates than any other proposal at this time,” the governor said.
Gov. Abbott’s Plan to Eliminate Texas Property Tax
Abbott wants a property tax plan that focuses on tax rate “compression.” This means that he wants to provide school funding so that school districts can lower property taxes — for all properties. The idea is that if schools have more funding, they won’t need to tax homeowners at higher rates to make the revenue needed to operate.
- Abbott says tax rate compression puts Texas on a path to eliminate Texas property taxes in future sessions.
- Patrick argues that Abbott’s plan to eventually eliminate property taxes through compression would mean raising the state’s sales tax rate.
- According to calculations Patrick presented, Texas homeowners would save an average of $710.01 in property taxes during year one of Abbott’s compression plan. The Senate’s plan would reduce property taxes by $1,245.93 for homeowners under 65 ($1,416.29 for homeowners 65 and older).
Patrick’s calculations are based on a homestead worth $331,000 and a school property tax rate of $1.1377, but not everyone in Texas has a home worth $331,000.
Dan Patrick’s Texas Property Tax Argument
Lt. Gov. Patrick and the Texas Senate’s plan allocates some of the surpluses from increased sales tax revenue for tax rate compression, but it also more than doubles the state’s current residence homestead exemption.
- The Texas Senate’s bill aims to reduce property taxes through a combination of compression and a modified state homestead exemption.
- The Texas homestead exemption would increase to $100,000 for homeowners under 65 and to $110,000 for homeowners 65 and older.
So, if the Texas Senate’s plan saves homeowners more in year one (on average), but Abbott’s plan to eliminate property tax through compression provides relief to businesses and all homeowners, which is better for you? Other than whether or not you own a business, that depends on how much the Texas homestead exemption saves you.
Texas Homestead Exemption
A homestead exemption reduces the amount of taxable value on a property. The current Texas residence homestead exemption is $40,000, meaning that Texans could have their taxable home value reduced by $40,000.
Raising the exemption to $100,000 (as proposed in the state Senate bill) would save many Texas homeowners more in year one of the property tax cuts, according to the calculations Patrick presented. But some homeowners may not save the more than $1,200 Patrick mentioned when presenting the property tax calculations.
- Landlords may not save more under the Senate’s plan since Texas requires the property to be the owner’s primary residence to qualify for the residence homestead exemption. This means that landlords’ rental properties would not qualify for the increased exemption.
- Homeowners that take a property tax exemption in another state (like those with seasonal homes in Texas) would not benefit from the increased homestead exemption. (Texas requires homeowners to state they don’t claim any other homestead exemption, whether in Texas or anywhere else, to qualify for the Texas general exemption.)
When Will a Texas Property Tax Bill Pass?
The Texas property tax debate drags on, and no one knows when the stalemate will end. But Gov. Abbott has expressed that the most important thing is for the state House and Senate to come to an agreement. Some might take this as a sign that the governor is willing to compromise. Abbott has said that he will call another special session if the parties cannot agree on Texas property tax relief.