State lawmakers have reached a deal on how to allocate more than $3 billion in new property tax relief, with the bulk of the cuts set to benefit homeowners.
The agreement, revealed in Senate and House committee hearings Monday, would increase the homestead exemption to $140,000 for most homeowners and to $200,000 for seniors and those with disabilities. The proposal would also increase the exemption for property owned by businesses from $2,500 to $125,000, effectively reducing the taxes they pay on inventory and office expenses.
State Rep. Morgan Meyer, a Dallas Republican who chairs the House Ways & Means committee, thanked Republican leadership for “working together to provide meaningful property tax relief.”
Both proposals still need final sign-off by the Texas House and Senate. Gov. Greg Abbott, who has made property tax relief a priority this year, has yet to weigh in.
The deal largely mirrors legislation favored by the state Senate, which voted unanimously in February to raise the homestead exemption from the current $100,000. The exemption lowers the taxable value of a home and only applies to someone’s primary residence.
The increased exemption would save homeowners an average of $363 annually, said state Sen. Paul Bettencourt, a Houston Republican and the bill’s author, when he proposed the bill in February.
The House had originally proposed spending the bulk of the money to reduce school property tax rates across the board, a mechanism known as compression. Business interests have supported the approach because it spreads tax relief to commercial properties as well as primary residences.
The House plan appears all but dead, as Meyer said his committee would vote out the Senate tax proposal “as is.”
“I think compression is the fairer method of lowering property taxes for everyone,” said Cody Vasut, a Republican from Angleton. “But certainly homeowners are seeing probably some of the heaviest effects of rising property taxes.”
Vasut said that even if the final property tax legislation doesn’t include any reduction in overall tax rates, compression passed in previous legislative sessions would carry forward.
The deal follows a contentious fight in 2023, when lawmakers returned for special sessions to hammer out details on a $12.7 billion property tax relief package. Ultimately, they agreed to a compromise deal that increased the homestead exemption to $100,000 from $40,000 and compressed school tax rates by 10.7 cents for every $100 of property value.
Democrats have mostly supported increasing homestead exemptions, which tax experts say deliver the most relief for low-income households. “If we’re going to cut taxes, the best and most equitable way to do it is the homestead exemption,” said state Rep. Trey Martinez Fischer, a San Antonio Democrat.
But lawmakers from both parties have questioned whether continued property tax cuts are prudent. The budget for the coming biennium sets aside a whopping $51 billion to pay for past cuts and fund new ones – 22% of the state’s total spending, according to estimates from the Legislative Budget Board.
“What’s good today could be a major challenge tomorrow,” Martinez Fischer said. “I wish the legislature would be as focused on the needs of the state as they are on cutting people’s taxes.
On Monday, a Senate committee also considered House Bill 9 by Meyer, which would reduce taxes charged on business property like inventory and office expenses. The original bill proposed a $250,000 exemption at a cost to the state of $566 million over the coming two-year budget cycle, but a committee substitute reduced that to $125,000. That translates to roughly $2,500 annually in savings for the average business owner, Bettencourt said.
“It’s a great idea… to do targeted property tax relief for businesses,” Bettencourt said. “We’re happy that the homestead exemption bills are moving too. That means we’ve got home and business property tax relief on the way in the Texas legislature and that’s a happy day.”