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Texas Property Tax Bill Brings Welcome Relief to Homeowners

March 15, 2024

In the wake of the 2023 elections, Texas homeowners received a monumental boost with the passing of Proposition 4, marking the largest property tax relief package in the state’s history. This sweeping reform aims to lower property taxes for DFW homeowners and potential buyers, promising an even brighter future for the Lone Star State’s real estate landscape.

How Does the Texas Property Tax System Work?

The Texas property tax system is a critical mechanism for funding local services and infrastructure. Here’s a comprehensive overview of how it operates:

What is Property Tax?

Property tax is a local tax imposed on property owners based on the value of their property, including both land and buildings. This tax is pivotal for funding essential community services. In Texas, the property tax system is administered by local government entities. Each county has an appraisal district responsible for assessing property values within its jurisdiction.

Taxing Units Explained

A taxing unit refers to any local government entity that imposes property taxes. This includes school districts, junior colleges, counties, cities, and special purpose districts (e.g. hospital districts, water districts, library districts, etc.) each with the authority to levy taxes against properties within their areas to fund various public services.

Who Pays Property Taxes?

Property owners are obligated to pay property taxes on their real estate holdings. This includes owners of residential homes, commercial properties, and land.

Determining Taxable Value

The taxable value of a property is determined by local appraisal districts, which assess the market value of properties annually. This valuation process considers the property’s condition, location, and any improvements or additions made.

Tax Collection and Deadlines

Local tax assessor-collectors are responsible for collecting property taxes. Taxes are typically due by January 31st following the year in which they are assessed. Failure to meet this deadline can result in penalties and interest.

Appealing Tax Valuations

Property owners have the right to appeal their property’s assessed value if they believe it does not reflect their property’s actual market value or if there are discrepancies in the assessment. This process involves presenting a case to the local appraisal review board.

Usage of Property Tax Revenue

Property tax revenues are crucial for funding public schools, roads, police and fire protection, and other municipal services. These funds are instrumental in maintaining and improving the quality of life within communities.

What is the Texas Property Tax Relief Bill?

Proposition 4 is not a standalone property tax cut bill, but rather an amendment to the state constitution that introduces a comprehensive $18 billion property tax relief package. This transformative move aims to ensure a more equitable property tax system, thereby reducing the financial load on Texas homeowners.

Homestead Exemption Change

Central to this relief package is the modification of the homestead exemption. The homestead exemption — which reduces the taxable value of a primary residence and therefore lowers property taxes — was increased from $40,000 to $100,000. This change effectively lowers the taxable value of real property that is designated as a “homestead,” which decreases the homeowner’s overall tax burden. 

Still, those savings impact the state budget. To counterbalance the revenue shortfall resulting from the increased homestead exemption, the amendment also makes provisions for rate compression, which reallocates state funds from other sources. This strategic move ensures that while homeowners enjoy reduced property taxes, the essential services traditionally funded by these taxes remain uncompromised.

School District Tax Rate Reduction

Another pivotal element of the relief package is the reduction of school district tax rates. By lowering these rates, the amendment further alleviates the property tax responsibilities of Texas homeowners. Similar to the homestead exemption adjustment, this rate reduction is also offset by rate compression which reallocates taxes collected elsewhere, maintaining a steady flow of necessary funding to Texas schools. This safeguarding measure ensures that, despite the tax cuts, the quality of education and resources available to students and teachers remains unaffected.

The overall strategy behind the Texas Property Tax Relief Bill is to provide meaningful tax relief to homeowners while simultaneously ensuring that the state’s critical services, especially education, do not suffer from a lack of funding. By carefully balancing tax reductions with adjustments elsewhere, the state of Texas aims to foster a more homeowner-friendly tax environment without compromising on the quality of public services.

Implementation of Texas Property Tax Relief: When Does it Go Into Effect?

The property tax relief introduced by Proposition 4 goes into effect for the tax year 2023, offering immediate financial reprieve to homeowners across Texas. This timely implementation underscores the state’s commitment to supporting its residents and fostering a more affordable living environment.

Texas’ Property Tax Cut: A New Era for Texas Homeowners

The approval of Proposition 4 opens a new chapter for Texas homeowners and prospective buyers, making it an opportune time to invest in a home. The property tax relief not only eases the financial strain on current homeowners but also makes homeownership more accessible to potential buyers. 

Amidst this favorable financial climate, exploring a new home in a Hillwood Community becomes even more appealing. With various builders offering enticing incentives on new homes, the dream of owning a home in Texas is now more achievable than ever. We encourage you to reach out for more information, visit our communities, tour the builders‘ models, and discover the exceptional value and quality of life that awaits you in a Hillwood Community. Thanks to the unprecedented support of Proposition 4’s property tax relief, now is the perfect moment to embark on the journey to finding your dream home in Texas!