Property Taxes and Affordability in Texas
It’s no secret that Texas has some of the most affordable home prices in the country. You can easily find a very nice 4 bedroom, 3 bath home with ample square footage on a nice lot in a desirable neighborhood in the low to mid $200,000’s. The flip side is that property taxes in Texas can be a bit on the high side. And property appraisals in Texas, which is what the property taxes are based, has been on a constant increase over the last few years.
Texas Homestead Exemption
On November 3rd, Texans will vote “Yes” or “No” on The Texas Homestead Exemption for School District Property Taxes Amendment, otherwise known as Proposition 1. The official ballot title reads as follows: “The constitutional amendment increasing the amount of the residence homestead exemption from ad valorem taxation for public school purposes from $15,000 to $25,000, providing for a reduction of the limitation on the total amount of ad valorem taxes that may be imposed for those purposes on the homestead of an elderly or disabled person to reflect the increased exemption amount, authorizing the legislature to prohibit a political subdivision that has adopted an optional residence homestead exemption from ad valorem taxation from reducing the amount of or repealing the exemption, and prohibiting the enactment of a law that imposes a transfer tax on a transaction that conveys fee simple title to real property.” (Texas Legislature SJR No. 1)
Voting “Yes” would increase the homestead exemption from $15,000 to $25,000 (elderly and disabled Texans would see their exemptions increase from $25,000 to $35,000). The proposition also would prohibit enacting a real estate transfer tax. Voting “No” would not change the current homestead exemption of $15,000. Depending on the district in which the homeowner resides, the estimated savings per year is between $120-$130 and would result in a cost of $1.2 billion in tax revenue for school districts over 2 years. The lost revenue would, however, be recouped by allowing schools to apply for additional state aid from the Foundation School Fund. How is that funded you might ask? It comes from revenue from the Permanent School Fund, supplied by land property rights income and state fuel taxes, according to the Texas Education Agency.
The Bottom Line
The real crux of the matter is that Texans feel over-taxed on real estate holdings. While this may not fix the problem entirely, it’s a start. And the bottom line…Texas is still a great place to own real estate because of its affordability.
Photo courtesy of David Castillo Dominici and FreeDigitalPhotos.net