GOVERNMENT $18B tax relief package projected to trim bills for all homeowners
Tax relief The Texas Legislature approved an $18 billion plan to cut property taxes for homeowners and businesses. The tax cuts will show up on this year’s bills if approved by voters during the Nov. 7 election. BREAKING DOWN YOUR TAX BILL
The equation
BY HANNAH NORTON
according to the Texas Taxpayers and Research Association. The state is expected to spend roughly $5.3 billion to reimburse schools for the tax cuts. School district tax rate compression Lawmakers also set aside $12.7 bil- lion to “compress,” or reduce, school district maintenance and operations taxes, which make up the majority of a homeowner’s tax bill, by 10.7 cents for the 2023-24 school year. The author of
Texas lawmakers passed a sweep- ing plan to cut property taxes on the average home by over $1,200. The July 13 passage of Senate Bill 2 closed out the second special legisla- tive session of the year and brought an end to seven months of negotiations. The $18 billion package includes two bills and a constitutional amendment. For the tax cuts to show up on this year’s tax bill, Tex-
Taxable value The value of a property that can be taxed
$331,000 Average base home value in Texas
Local tax rate Including school district, city, county, utility district, etc.
Homestead exemption
This is the portion of a primary home’s base value that is exempt from taxes. Local municipalities may o er additional exemptions.
CURRENT $40K exemption Value that cannot be taxed
$331,000 Average home value in Texas $331,000 Average home value in Texas
$291K Taxable value
ans must approve the constitutional amendment during the Nov. 7 general election. The 31-member Senate unani- mously approved the legislation, while it got a few dissenting votes in the 149-member House. Gov. Greg Abbott signed Senate Bills
“SMALL BUSINESSES OPERATE ON THIN MARGINS, SO IN AN ECONOMY WHERE EVERY PENNY COUNTS, THIS TAX CUT WILL PROVIDE SIGNIFICANT SAVINGS TO BUSINESS OWNERS.” ANNIE SPILMAN, TEXAS DIRECTOR OF THE NATIONAL FEDERATION OF INDEPENDENT BUSINESSES
NEW $100K exemption Value that cannot be taxed
$231K Taxable value
the Senate bills, Sen. Paul Betten- court, R Houston, said taxes will decrease by 23.8% on average. Savings will vary by school district, but all of Texas’ 5.7 million homeowners are expected to
School district tax rate compression
Homeowners will pay reduced taxes to their local school districts. ISD tax rates will decrease by 10.7 cents . This is in addition to the 10.98 cents compression passed as part of the budget. For example, for a $300K home , decreasing the school district tax rate by 10.7 cents would cut an average tax bill by $321. The state of Texas will distribute $12.7 billion to schools .
NONHOMESTEAD APPRAISAL CAP
bene t from the move. Schools will receive money from the state to ensure they do not lose revenue as local tax rates fall. However, overall school funding will not change. Democrats unsuccessfully pro- posed amendments July 13 to send more money to schools and give teachers a one-time bonus. “Without question, the members in the Senate and House want to give the teachers their pay raise,” Patrick said. “We will have time in the fall, I believe, to give them a permanent raise, and not just a one-time raise.” In September or October, law- makers are expected to return to the capitol to discuss school funding, teacher pay and how to provide students with the best educational opportunities. Nonhomestead appraisal cap To help more property owners, the Legislature introduced a three-year, 20% appraisal cap for commercial and nonhomestead residential property worth $5 million or less. This means the value of the property cannot
2 and 3 on July 22. SB 2 becomes law if the constitutional amendment is approved, while SB 3 goes into e ect Jan. 1. Lt. Gov. Dan Patrick said the legisla- tion will save the average homeowner $1,250-$1,450 on their 2023 tax bill based on the average Texas home valuation of $331,000. Here’s what each portion of the tax relief plan means for Texans. Homestead exemption Texas homeowners can apply for a $40,000 exemption from school property taxes on their primary home. Seniors and people with dis- abilities are eligible for an additional $10,000 exemption. Under SB 2, homeowners can receive a $100,000 exemption, with $110,000 for seniors and people with disabilities. Additionally, people whose homes are worth $100,000 or less will not pay any property taxes to their local school districts. This will largely impact homeowners in rural areas. The average home value is less than $100,000 in 397 of the state’s 1,014 public school districts,
The new tax relief package includes a nonhomestead appraisal cap, which limits how much certain properties can increase in value annually. The value of property worth $5 million or less cannot increase by more than 20% year-over-year . The cap applies to all nonhomesteaded property , including second homes and commercial property.
Approximately 13 million properties will qualify.
BUSINESS FRANCHISE TAX EXEMPTION The new law also amends the state business franchise tax, which is calculated based on individual businesses’ circumstances. Businesses that make less than $2.47 million annually will no longer have to pay the tax. Roughly 67,000 small and midsize businesses will be exempt from the tax. Collectively, qualifying business owners will save around $300K each year .
SOURCES: TEXAS COMPTROLLER OF PUBLIC ACCOUNTS, TEXAS LEGISLATURE ONLINE COMMUNITY IMPACT
increase by more than 20% per year. The cap goes into e ect in 2024 and runs through 2026, at which point lawmakers can choose to extend, modify or stop the program. Business franchise tax exemption SB 3 eliminates the state franchise
tax for companies that make less than $2.47 million per year. The tax is calculated depending on individual businesses’ circumstances. Roughly 67,000 small and midsize businesses will no longer have to pay the tax or submit a “no tax due” form, Bettencourt said.
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CEDAR PARK FAR NORTHWEST AUSTIN EDITION • AUGUST 2023
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