Texas homeowners could see lower property tax bills if deal from Republican lawmakers passes

Legislators appear on track to boost the state’s homestead exemption, which lowers the amount of a home’s value that can be taxed to pay for public schools. Senate Bill 4 from state Sen. Paul Bettencourt, a Houston Republican, would raise the exemption from $100,000 to $140,000.

When combined with $3 billion in cuts to school tax rates proposed in the state’s upcoming two-year budget, the owner of a home valued at $302,000 in 2024 would have saved more than $500 on their 2024 school taxes, a Tribune calculation shows.

Older Texans and Texans with disabilities would get additional breaks under Senate Bill 23, another Bettencourt proposal, which would raise a separate homestead exemption for those homeowners from $10,000 to $60,000. That means they would see a total homestead exemption of $200,000.

Each proposal has passed out of the Senate. Lawmakers on the House Ways and Means Committee, which writes tax policy, voted Monday to advance the bills to the full House.

Businesses could see bigger breaks on property taxes they pay on their inventory, often referred to as business personal property. House Bill 9, by state Rep. Morgan Meyer, R-University Park, would exempt up to $125,000 of businesses’ inventory from taxation by any taxing entity, including school districts, cities and counties.

Texas is one of the only states that allows businesses’ inventory to be taxed, but it’s currently exempt from taxation if it’s worth $2,500 or less.

House and Senate lawmakers each had sought to provide targeted tax relief for businesses but had disagreed on how to do it. Initially, Meyer proposed to raise the business personal property tax exemption to $250,000. The Senate wanted to raise it to $25,000 while also providing $500 million in franchise tax credits. They wound up somewhere in the middle.

The Senate Local Government committee passed the House bill by a 6-0 vote May 5, advancing the bill to the full Senate.

Under the proposal, the state would send hundreds of millions of dollars to school districts to offset the cost of raising the exemption. Other taxing entities including cities and counties will have to bear the brunt of the exemption — raising the possibility that they’ll have to adopt higher property tax rates than they otherwise would have to offset the cost of the exemption.

It’s not clear if lawmakers in both chambers have agreed on how much money to send to school districts, who make up the bulk of a property owner’s tax bill, so they can lower their tax rates — a method known as “compression.” Decreasing the tax rate would lower property tax bills for homeowners and business owners alike. A draft of the state’s upcoming two-year budget includes $3 billion for compression.

Meyer had sought an additional $2.8 billion to put toward compression. His proposal hasn’t been scheduled for a vote on the House floor, and neither Meyer or Bettencourt mentioned it May 5.

None of the proposals advancing through the Legislature would directly benefit the state’s 4.2 million renter households — though tax-cut proponents argue renters benefit from cuts to tax rates.