Legislative Update: Texas Senate Advances Homestead Exemption Increase (SB 4)

Higher Exemptions, Additional Relief, and What Comes Next for Texas Homeowners and Seniors

Author

R. Coleman
March 03, 2025

El Paso, Texas

Real Property Update

March 3, 2025

Dear Homeowner, 

The Texas Senate has unanimously passed Senate Bill 4 (SB 4) and Senate Joint Resolution 2 (SJR 2), aiming to increase the homestead exemption for school district property taxes. The proposal suggests raising the exemption from $100,000 to $140,000 for all homeowners and to $150,000 for seniors. Voters will decide in November 2025 whether to amend the Texas Constitution to permanently implement the increased homestead exemption. If these measures clear the Texas House of Representatives and are signed by Governor Greg Abbott, the increase would apply retroactively to 2025 tax bills.

 Key Provisions of SB 4 and SJR 2: 

  • Increased Homestead Exemption: SB 4 and SJR 2 propose raising the homestead exemption for school property taxes to $140,000 for all homeowners and $150,000 for seniors.

  • School Tax Compression: SB 4 is designed to work with Senate Bill 1 to further reduce school property tax rates, providing additional tax relief through statewide rate compression.

  • Voter Referendum: Voters will decide in November 2025 whether to amend the Texas Constitution to permanently implement the proposed $140,000 homestead exemption. If approved, the increased exemption would apply retroactively to 2025 tax bills.

  • Hold-Harmless Provision: SB 4 includes a hold-harmless provision to address potential reductions in school district revenue, ensuring that school districts receive additional state aid to offset revenue losses.

Potential Impact: 

  • Tax Savings: The average homeowner could see an estimated annual savings of approximately $363.34, with potential additional savings from tax compression measures.

  • Zero School Property Taxes: Homeowners in 492 school districts (49% of Texas districts) with homes valued under $140,000 could see zero school property taxes if the measure is approved.

  • Senior Tax Relief: The passage of SB 4 could result in eighty to ninety percent of Texas seniors paying zero school property tax.

  • Illustrative Example: $300,000 Home in El Paso (2.9% Tax Rate): 

Scenario

Market Value

Homestead Exemption

Taxable Value

Annual Tax

Savings vs. No Exemption

No Exemption

$300,000

$0

$300,000

$8,700

$0

Non-Senior

$300,000

$140,000

$160,000

$4,640

$4,060

Senior

$300,000

$150,000

$150,000

$4,350

$4,350

This table illustrates the impact of property tax exemptions for a $300,000home in El Paso at a 2.9% tax rate. Without any exemptions, the annual property tax is $8,700. Homeowners qualifying for a Non-Senior Homestead Exemption reduce their taxable value to $160,000, lowering their annual tax to $4,640, saving $4,060. Those eligible for a Senior Exemption further reduce their taxable value to $150,000, bringing their annual tax to $4,350, maximizing their savings at $4,350.

  • School Funding: SB 4 includes a hold-harmless provision, ensuring that school districts receive additional state aid to offset revenue losses. The Texas Senate has also set aside $3 billion in the state budget to cover the potential loss in revenue from the increased exemption.

Concerns and Critiques: 

  • Limited Long-Term Relief: The impact of raising the homestead exemption may diminish over time as rising property values and local government spending reduce its effectiveness.

  • Sustainability of State Funding: The state’s commitment to compensating school districts for lost revenue relies on the availability of surplus funds. Maintaining this reimbursement could become challenging during economic downturns or budget shortfalls, potentially affecting consistent funding for public education.

Alternative Approaches to Property Tax Relief: 

  • Freeze School Maintenance and Operations (M&O) Property Tax Levies

  • Eliminate Local Taxing Entity Loopholes

  • Strengthen the No-New-Revenue Rate

  • Buy Down M&O Taxes with State Surplus

  • Limit State Spending Growth to 2% Annually

Political Context: 

  • Bipartisan Support: The Senate voted 30-0 to pass the measure, indicating bipartisan support.

  • Governor's Position: While Gov. Greg Abbott called for property tax relief, he did not explicitly support increasing the homestead exemption.

  • Republican Party Platform: The Republican Party of Texas advocates for reducing and ultimately eliminating property taxes, but the Texas Senate continues to rely on homestead exemptions.

Next Steps: 

The bill now moves to the Texas House of Representatives for consideration. The House has until March 14, 2025, to finalize legislation. If passed by the House and approved by Gov. Greg Abbott, Texas voters would need to approve the tax break in the next election to amend the Texas Constitution.

Important Deadlines to Remember

  • April: Notices of Appraised Value mailed by local appraisal districts.

  • May 15, 2025 (or 30 days after receiving the appraisal notice): Deadline to file a protest for your 2025 assessed property value. Missing this date forfeits your chance to challenge an inaccurate assessment.

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