Senate Committee OKs Homeowner Tax Cut

A Senate committee on Tuesday unanimously advanced a bill that would again cut state property tax revenues to try to insulate homeowners from rising property values.

Senate Bill 4 would raise the state’s homestead exemption for the second time in as many sessions, by allowing property owners to further undervalue their primary residence when calculating school district property taxes.

Currently, Texas allows homeowners to take $100,000 off of their assessed property value when calculating those school property taxes. For example, a $500,000 house would be taxed as though it were worth $400,000, reducing revenues to the state but saving homeowners money.

Increasing the exemption would cost the state about $3.1 billion dollars in lost revenues from the school district taxes over the next two years, according to an analysis by the state Legislative Budget Board. Through the 2030 fiscal year, those losses would cumulatively total $7.7 billion.

In its last session two years ago, the Legislature agreed to increase the exemption from $40,000 to $100,000 to cope with spiking property valuations, in part caused by the gulf between demand for housing in the Lone Star State and available housing supply. A 2024 report by the advocacy group Up For Growth estimated that Texas is about 320,000 housing units short of what it needs to meet demand. 

The homestead exemption is set in the state constitution. This session, just as last, two-thirds of lawmakers will need to approve a joint resolution to place the change on the ballot for the next general election, and a majority of voters will need to approve it.

For now, that seems all but assured. Senate Bill 4 is the rare fully bipartisan bill in the chamber, cosponsored by all 31 members of the Senate, including 11 Democrats and 20 Republicans.

And Republican Gov. Greg Abbott declared property tax cuts a priority of his for this session during his State of the State address earlier this month.

The seven-person Senate Committee on Local Government passed Senate Bill 4 out of committee with a recommendation by a 6-0 vote. Sen. Robert Nichols, R-Jacksonville, indicated his support for the bill in a written note, and the voting record on the bill’s website reflects his extra vote.

SB 4 now heads to the Senate for a full vote, along with Senate Joint Resolution 2, which would amend the Texas Constitution to reflect the statutory changes in its companion bill.

The change will benefit property owners, but it won’t directly provide relief to the state’s 4.2 million renter households, who account for more than a third of Texas’s housing units, according to the U.S. Census Bureau. The homestead tax exemptions are available only to property owners or those who are making mortgage payments to eventually own the property. It also only can be used to lower taxes on primary residences, not vacation homes.

Still, Committee Chair Paul Bettencourt, R-Houston, argued on Tuesday that landlords will pass benefits from the cuts on to renters in order to remain competitive.

Senate Bill 4 will compound with promises state lawmakers made last session to send school districts $3 billion over the next two years to bring down their local tax rates, the Texas Tribune reported.

Had both of those relief measures been in effect last year, a homeowner paying the average district tax rate would have saved about $528 on their taxes last year, according to an analysis by the Tribune.

Bettencourt on Tuesday said that Texas now carries about 56% of the school tax burden for Texas property owners, the Dallas Morning News reported.