Oct 6, 2021

Texas 2021 Real Estate Legislative Update 2.0

A little property tax relief is coming for some Texas homeowners. Two minor property tax bills were approved at the Texas Legislature’s August 2021 Special Session. With some of the highest property tax rates in the country, most homeowners welcome any law that provides Texans a tax break.

New Homeowner Homestead Exemption

Under current law, when someone purchases a home, they must wait until January 1 of the following year to receive the benefit of a homestead exemption. This new law allows a homebuyer to receive their homestead exemption in the year that they acquire the property, rather than having to wait for January 1 of the following year.

Starting in January 2022, new Texas homeowners who qualify for a homestead exemption will become immediately eligible to receive a property tax reduction when they purchase their property. Those buyers will receive the exemption allocated proportionally from the time they purchase the property. For example, if the buyer purchases the property in February, they will receive the homestead exemption on that year’s tax bill for February through the end of the year.

Texas homestead exemptions from counties, schools, cities, and special districts reduce the property taxes for the homeowner. The amounts vary from county to county. All Texas homesteads receive a $25,000 exemption on their home’s value from school property taxes. Other local entities, like cities and counties, offer a separate residence homestead exemption. A homestead exemption can typically save a homeowner 10%-20% on their property taxes.

Senior and Disabled Exemptions

The Texas Legislature passed “an Act relating to the reduction of the amount of a limitation on the total amount of ad valorem taxes that may be imposed by a school district on the residence homestead of an individual who is elderly or disabled to reflect any reduction from the preceding tax year in the district’s maximum compressed rate and to the protection of school districts against the resulting loss in local revenue.”

That’s a mouthful of legal jargon. Essentially, this legislation proposes a reduction in school taxes for seniors and disabled Texans. It would extend the school property tax rate cuts approved by the Texas Legislature in 2005, 2007, and 2019.

School property taxes for homeowners who are at 65-plus years old or who are disabled are frozen at the amount owed in the year they qualify. However, when some school districts reduced their tax rates, those homeowners did not see a reduction in their tax bills due to this frozen value. The new law would reduce the frozen value by the same percentage as the reduction in a school district’s tax rate, starting in the 2023 tax year.

Because there are different property tax laws for Texas elderly and disabled property owners, reforms to their tax rates must be made by constitutional amendment. Texas voters will need to approve this on local election ballots in 2022. If approved, the amendment to authorize this tax cut would take effect in January 2023.

Texas Property Taxes

No one likes to pay taxes and Texans don’t like hearing that our property taxes are higher than most other states. However, we do not have state income taxes like many other states. Texas counties set their own property tax rates, and they vary across the state. Counties with smaller populations tend to have lower property taxes. The average property tax rate in Texas is 1.8 percent of the property’s appraised value.

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