Building a Better Homestead Exemption

/, Invest in Texas, Texas Legislature/Building a Better Homestead Exemption
Dick Lavine, Senior Fiscal Analyst at the Center for Public Policy Priorities

A homestead exemption subtracts a certain amount from the appraised value of your home to arrive at the taxable value, on which your tax bill is based. Current law allows any taxing unit — including a city, county, school, or special district – to offer an exemption of up to 20 percent of your home’s value. In addition, school districts must grant a $15,000 exemption for all residence homestead owners, with an additional $10,000 for homeowners age 65 or older or disabled.

But local governments, other than school districts, are not authorized to grant a similar flat-dollar-amount homestead exemption, other than to homeowners age 65 or older and/or disabled.

The problem: A flat-dollar-amount exemption directs more of the benefits to middle-income households than does a percentage exemption.

An flat-dollar-amount exemption of $15,000, for instance, reduces the taxes on a $100,000 home by a larger percentage than it reduces taxes on a $1,000,000 home.  A percentage exemption, of course, reduces taxes on all homes by the same percentage.

The Comptroller has calculated that only one-quarter of the benefit of a percentage exemption goes to the 60% of Texas households with incomes under $87,000.  In contrast, more than 40% of the benefit of a flat-dollar-amount exemption goes to these households.

A flat-dollar-amount exemptions thus is the better, fairer way to reduce property taxes for homeowners.

Rep. Eddie Rodriguez has filed the necessary legislation to permit cities, counties, and special districts the option a granting a more progressive flat-dollar-amount homestead exemption as an alternative to the percentage homestead exemptions that many of them offer now.

The bills are HJR 138 and HB 3348.

At the Center for Public Policy Priorities, we believe in a Texas that offers everyone the chance to compete and succeed in life. We envision a Texas where everyone is healthy, well-educated, and financially secure. We want the best Texas - a proud state that sets the bar nationally by expanding opportunity for all. CPPP is an independent public policy organization that uses data and analysis to advocate for solutions that enable Texans of all backgrounds to reach their full potential. We dare Texas to be the best state for hard-working people and their families.

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