Government
BY HANNAH NORTON
Texas lawmakers passed a sweeping plan to cut property taxes on the average home by over $1,200 per year. The July 13 passage of Senate Bills 2 and 3 closed out the second special legislative session of the year and brought an end to seven months of negotiations. $18B tax relief package passed
THE EQUATION
The $18 billion plan includes two bills and a constitutional amendment. For the tax cuts to show up on the 2023 tax bill, Texans must approve the constitutional amendment during the Nov. 7 general election. The constitutional amendment will appear on all ballots as Proposition 4. Gov. Greg Abbott signed the legislation July 22. SB 2 will become law if the constitutional amendment is approved, while SB 3 goes into effect Jan. 1. Lt. Gov. Dan Patrick said the bills would save the average homeowner $1,250-$1,450 on their 2023 tax bill. The average home in Texas is valued at $331,000.
A home’s value—the appraised value minus any exemptions—varies by taxing entity.
Taxable value
Including school district, city, county, utility district, etc.
Local tax rate*
The money owed to taxing agencies.
Tax bill
*If the rate is expressed per $100,000 of valuation, divide the tax bill by 100
SOURCES: TEXAS COMPTROLLER OF PUBLIC ACCOUNTS, TEXAS LEGISLATURE ONLINE/COMMUNITY IMPACT
Homestead exemption
Nonhomestead appraisal cap
Current
The tax relief package also 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 nonhomestead property , including second homes and commercial property • Approximately 13 million properties will qualify The cap goes into effect in 2024 and runs through 2026, at which point lawmakers can choose to extend, modify or stop the program.
Texas homeowners can apply for a $40,000 exemption from school property taxes on their primary home. Seniors and people with disabilities 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. Since school districts receive most of their revenue from property taxes, the state is expected to spend $5.3 billion to reimburse schools for the increased exemptions.
Tax exemption (Value that cannot be taxed)
Average home value in Texas
Taxable value
$331,000 $40,000 $291,000
New
Tax exemption (Value that cannot be taxed)
Average home value in Texas
Taxable value
$331,000 $100,000 $231,000
School district tax rate compression
Business franchise tax exemption
rates fall. However, overall school funding will not change. Democrats from both chambers of the Leg- islature unsuccessfully proposed amendments July 13 to send more money to schools and give teachers a one-time bonus. “Without question, the members in the Sen- ate 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.” Lawmakers are expected to return to the Capitol for a third special session in Septem- ber or October. They will likely discuss school funding, teacher pay and how to provide stu- dents with the best educational opportunities.
Lawmakers set aside $12.7 billion to “com- press,” 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. This is in addition to 10.98 cents of com- pression included in the state budget. • Savings will vary by school districts, but taxes are expected to decrease by 23.8% on average • For example, on a $300,000 home , trimming the school district tax rate by 10.7 cents would cut the average tax bill by $321 per year Schools will receive money from the state to ensure they do not lose revenue as local tax
Texas’ franchise tax is calculated based on businesses’ individual circumstances. • Businesses that make less than $2.47 million annually will no longer have to pay the tax or submit a “no tax due” form • Roughly 67,000 small and midsize businesses will be exempt from the tax • Collectively, qualifying businesses are expected to save around $300,000 per year
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ROUND ROCK EDITION
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