What Texas property tax reform means for homeowners

Okay, so, what does this actually mean in potential savings for you?

Between the increased homestead exemption and lower school tax rate, lawmakers and policy analysts are projecting a Texas homeowner’s property taxes would be reduced by an average of 41.5%, or about $1,300 per year for a $350,000 home. 

Now, remember, another benefit we get by having a homestead exemption is that we have a 10% appraisal cap. Meaning that they cannot increase our taxable value by more than 10% from the previous year. I know that saved alot of people in the past coupe of years since the home values skyrocketed. 

Speaking of the appraisal cap, let’s touch on a few other things within the tax cuts package. 

The law would create a limit on appraisals for commercial, mineral and residential properties that don’t have a homestead exemption and are valued under $5 million dollars. 

There would be a temporary 20% appraisal cap so that they could not increase in taxable value more than 20% from the previous year. Now this would only be valid until 2026 unless lawmakers and voters decide to continue the program. 

Proposition 4 also includes franchise tax exemptions. 

This would double the amount of money a business can make before it is subject to franchise tax from $1.24 million to $2.47 million. It would also not require businesses that don’t meet the new threshold for having to pay franchise tax to file forms to report those taxes. 

Okay, so some of you who may not be business owners might glaze over on that point. But let me tell you, if you value your small local businesses, I believe this will be helpful. I can tell you from experience that small business owners get taxes out the wazoo already. And even though we don’t meet the threshold to pay franchise tax, we still currently have to pay our tax preparer just to file a form to say that we didnt make enough money to pay taxes. So that’s another fee.

Another aspect of proposition 4 is that voters would have a say in who is on our appraisal boards. 

Which, I personally think is a great idea. Currently county appraisal districts appoint these positions. Under the new legislation, each appraisal district’s board of directors would include three positions elected by a majority vote at a county general election for four-year terms. This is a great way to hold people accountable.

Now before we tell you how to take advantage of these tax cuts, I wanted to let you also know how this proposition would affect our mom and pop property investors. Those who are landlords would qualify for the reduction in school property taxes. Rental properties valued under $5 million each would also qualify for the year-over-year 20% cap on appraisal values for the next 3 years, or 2026. Hopefully this will help stabilize rent rates for those leasing from smaller mom and pop landlords. 

So, how do you go about taking advantage of these tax cuts?

Well, first of all, you must vote yes for proposition 4 on the November 7th ballot. And secondly, once the proposition passes, you will automatically see the benefits. It’s that easy. And the cool thing is that the changes would be applied for the 2023 tax bills due in January of 2024. 

Now, as we said earlier, if you live in your home and haven’t already filed for homestead exemption, you need to do so right away through your county appraisal district office. In most situations, the exemption can be retroactive up to two years. Once you have your exemption, you do not need to reapply for it every year. It stands until you no longer live in the home. 

We hope this breakdown of the 2023 Texas property tax reform or proposition 4 was helpful for you homeowners. If you want to stay up to date on Texas property taxes and all things related to the Dallas Fort Worth real estate market, be sure to sign up for our email updates below.