Estimated Time to Read: 7 minutes
Thursday, the Texas Senate unanimously (30-0) passed Senate Bill 4 (SB 4) and Senate Joint Resolution 2 (SJR 2), which propose increasing the homestead exemption for school district property taxes from $100,000 to $140,000. For seniors, the exemption would rise to $150,000.
According to State Sen. Paul Bettencourt (R-Houston), the author of both proposals, the average homeowner would see an estimated annual savings of approximately $363.34, with potential additional savings from tax compression measures.
“Today, the Texas Senate delivered a win for homeowners statewide. By passing SB 4 and SJR 2, we are putting real dollars back into the pockets of Texans while ensuring our schools remain fully funded.”
“The average homeowner will see an estimated annual savings of nearly $363, but wait there’s more, as nearly $500 of help is on the way!”
Source: Statement, State Sen. Paul Bettencourt (R-Houston), 2.13.2025
This proposal follows Proposition 4 in 2023, which codified a $100,000 homestead exemption in the Texas Constitution.
Though the legislation passed the Senate, its legislative prospects in the lower chamber, the Texas House of Representatives, are unknown. Historically, House lawmakers have favored a combination of appraisal caps and the additional compression of the school maintenance and operations (M&O) taxes as an approach to property tax relief.
Key Provisions of SB 4 and SJR 2
The following are included in SB 4 and SJR 2:
- Increase in Homestead Exemption: The proposed legislation raises the exemption for school property taxes to $140,000 for homeowners and $150,000 for seniors.
- School Tax Compression: SB 4 is designed to work in conjunction with Senate Bill 1 (General Appropriations Act) to further reduce school property tax rates, aiming to provide additional tax relief through statewide rate compression.
Texas Lt. Gov. Dan Patrick noted that homeowners in 492 school districts (49% of Texas districts) with homes valued under $140,000 would see zero school property taxes if the measure is approved.
Voter Referendum Scheduled for November 2025
The passage of SJR 2 through both legislative chambers would mean that 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.
School Funding Considerations
To address potential reductions in school district revenue due to the increased exemption, SB 4 includes a hold-harmless provision, ensuring that school districts receive additional state aid to offset revenue losses. This measure is intended to prevent financial disruptions for school districts and taxpayers.
Critiques of Increasing the Homestead Exemption
While the proposed increase in the homestead exemption aims to provide tax relief, some analyses, including our own, suggest potential challenges:
- Limited Long-Term Relief: Raising the homestead exemption offers short-term relief to homeowners; however, its impact may diminish over time as rising property values and local government spending reduce its effectiveness. This suggests that without additional measures, the relief provided may be temporary.
- Sustainability of State Funding: The state’s commitment to compensating school districts for lost revenue relies on the availability of surplus funds. During economic downturns or budget shortfalls, maintaining this reimbursement could become challenging, potentially affecting consistent funding for public education.
Does Gov. Abbott Favor Another Approach?
It is also worth noting that though Texas Gov. Greg Abbott called for property tax relief as an emergency legislative priority during his recent State of the State Address, he did not explicitly support an approach of increasing the homestead exemption to accomplish it.
In fact, in supporting materials he explicitly says,
The Governor will work with the Texas Legislature to:
- Use at least $10 billion of the state’s budget surplus for property tax relief
- Speed-up tax rate compression to lower school district M&O tax rates, providing relief for ALL property taxpayers
- Eliminate local taxing authorities’ loopholes by requiring two-thirds voter approval for all tax increases
- Increase the business personal property tax exemption to $100,000 to support small businesses
- Require all local bond issues and tax rate eclections be on the November ballot and approved by two-thirds supermajority of voters
Source: One-Pager, Texas Gov. Greg Abbott (R)
Nowhere does it indicate he supports the Legislature increasing the homestead exemption to provide relief, for yet another session, especially as property tax burdens continue to rise despite past relief efforts.
Who Benefits?
It is worth noting that the author of SB 4 and SJR 2, State Sen. Paul Bettencourt (R-Houston), also runs a private business that benefits from the continued existence of property taxes themselves.
If lawmakers truly wanted to not only provide lasting property tax relief, but also a path to the elimination of the tax altogether, they would do the following:
- Freeze School Maintenance and Operations (M&O) Property Tax Levies: School M&O taxes make up a significant portion of property tax bills. By freezing these levies, the Legislature could prevent them from continuing to grow unchecked.
- Eliminate Local Taxing Entity Loopholes: Many local governments have found ways to circumvent the “no-new-revenue” tax rate. Stricter enforcement of this rule, along with the elimination of these loopholes, could help ensure that property taxes do not increase year after year without voter approval.
- Strengthen the No-New-Revenue Rate: Under current law, the no-new-revenue tax rate is a rate that allows taxing entities to generate the same revenue as the previous year, taking into account rising property values. However, taxing entities can still increase revenues without voter approval. By making this rule stricter—requiring voter approval for any revenue increase—local governments would be forced to limit their spending or justify it to taxpayers directly.
- Buy Down M&O Taxes with State Surplus: Using 90% of the state’s surplus funds to buy down school M&O taxes would be a significant step toward reducing Texans’ overall property tax burden. Over time, this could allow the state to compress the M&O tax rate to zero, effectively eliminating one of the most significant components of the property tax system.
- Limit State Spending Growth to 2% Annually: One of the fundamental reasons property tax relief efforts have failed is the state’s ballooning budget. By capping spending growth at 2% per year, the state could ensure that a greater portion of surplus funds are directed toward tax relief, rather than being absorbed by new government programs or expenses.
Alignment With the Republican Party Platform
The Republican Party of Texas’ 2024 State Platform advocates for reducing and ultimately eliminating property taxes. The platform calls for transitioning school funding away from property taxes over a 12-year period, closing loopholes that allow tax increases without voter approval, and replacing the appraisal system with one based on purchase price.
Despite this, the Texas Senate and Lt. Gov. Dan Patrick have continued to rely on homestead exemptions rather than moving toward more structural tax reforms.
Conclusion
The legislation now moves to the Texas House of Representatives, where multiple proposals addressing property tax relief are being considered. The House has until March 14, 2025, to finalize legislation.
In previous legislative sessions, disagreement between the House and Senate on the best approach to tax relief led to special legislative sessions called by Governor Abbott. With competing tax relief proposals still on the table, will lawmakers be able to find common ground this time?
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