Texas has one of the nation's highest median property tax bills, at $3,971 — $1,281 higher than the U.S. median. The 89th Texas Legislative session started in early January and will last until early June. Property tax relief is one of the main priorities for the legislative and executive branches.
In the 2023 session (sessions are every two years), the Legislature approved $12.7 billion in new tax cuts, including boosting the homestead exemption from $40,000 to $100,000.
This session, the Legislature wants to continue providing relief by introducing significant bills that again raise the homestead exemption on school taxes — this time from $100,000 to $140,000.
Furthermore, if passed, school vouchers or education savings account (ESA) programs are a hot topic that will indirectly affect property taxes.
Below, we explain the most essential property tax-related bills and where they stand.
Senate Bill 4
Senator Paul Bettencourt of Houston, who owns Bettencourt Tax Advisors, LLC, proposed Senate Bill 4 (SB 4). It increases the state-wide homestead exemption on school district taxes by $40,000 from $100,000 to $140,000. It’d be $150,000 for senior citizens due to the already existing state-wide 65+ homestead exemption worth $10,000.
If passed, Texans would be exempt from school district taxes on the first $140,000 of their assessed property value.
For example, the median Texas home price is $298,511. Under SB 4, a home at this price would only have to pay the school district’s taxes on an assessed value of $158,511.
Estimates reveal that the average Texas homeowner would save $363.44 with this homestead exemption increase. Combined with the compressed school tax rate (discussed later in House Bill 8 section), it’d be $496.57.
According to Senator Bettencourt, nearly half of the state’s school districts have home values below $140,000. Thus, almost half of all Texas residents wouldn’t pay property taxes for public schools.
For reference, here is the Texas school district homestead exemption timeline from the past 25+ years:
1997: $5,000
2015: $25,000
2022: $40,000
2023: $100,000
2025 (if passed): $140,000
Is There Replacement Funding?
According to the Legislative Budget Board, if SB 4 were passed, it would cost the state $7.7 billion by 2030.
So, where does this money come from to compensate for the lack of property taxes?
The Senate set aside $3 billion in its upcoming two-year budget to help school districts offset the revenue loss from the potential homestead exemption increase. In the 2019 session, legislators also committed an additional $3 billion to school districts, totaling $6 billion over the next two years.
Where Does SB 4 Stand?
In early February, the Local Government Committee unanimously approved the bill, followed two days later by Texas Senators with a 30-0 vote.
The bill heads to the Texas House and — if approved, which is likely the case — will require voter approval since it’s an amendment to the Texas Constitution.
Governor Abbott’s State of the State Address
In his State of the State Address, Governor Greg Abbott included property tax relief in his emergency items.
One of the major takeaways is that Governor Abbott wants to require a two-thirds supermajority vote for all tax increases. Right now, it’s a simple majority of over 50%. Furthermore, he wants all local bond issues and tax rate elections to be only on November ballots.
Impact on a Supermajority Vote
Although a two-thirds vote could provide property tax relief for homeowners, it could put some school districts into a further deficit. We found from the November 2024 election that only 47% of property tax-related bills passed.
In similar circumstances, if Texas required a supermajority, only 2 out of the 30 November 2024 school-district propositions would’ve passed:
Highland Park ISD’s Proposition A (passed by 68%)
Sunnyvale ISD’s Proposition A (passed by 67%)
From the November general election, no concrete correlation existed between how rural and urban areas voted on property tax-related bills, demonstrating the uncertainty and unpredictableness of how Texans vote on property taxes.
If a supermajority requirement were to pass, voters' decisions on property taxes for school districts would likely depend heavily on whether versions of Senate Bill 2 or House Bill 3 — known as the two school voucher bills — pass and their effect on school districts’ budgets.
Senate Bill 2 and House Bill 3
Senate Bill 2 Explained
Senate Bill 2 (SB 2) is one of the more contentious bills in this year’s legislative session. The Texas Senate passed the bill on February 5th with a 19-12 vote. It now sits with the House to review.
SB 2 introduces a school voucher program, allowing families to use taxpayer dollars to fund a child’s private school education. Promoted under the umbrella of “school choice,” the bill proposes the creation of Education Savings Account (ESA) programs, which allocate funding as follows:
$10,000 annually per student attending an accredited private school.
$11,500 annually per student with disabilities attending an accredited private school.
$2,000 annually per homeschool student for qualifying educational expenses.
One critical aspect of SB 2 is its income threshold for eligibility.
The bill defines low-income status as an annual household income at or below 500% of the federal poverty guidelines — equivalent to $160,750 or less for a family of four.
House Bill 3 Explained
On February 20, the Texas House introduced House Bill 3 (HB 3), a proposal similar to SB 2, seeking to allocate taxpayer dollars to private school tuition through ESAs.
However, one main difference is the eligibility requirements.
HB 3 limits full ESA eligibility to families earning up to 200% of the federal poverty guidelines rather than the broader 500% threshold in SB 2.
This equates to $62,400 versus the $160,750 limit in SB 2. Moreover, the House’s plan earmarks approximately $1 billion for the voucher initiative.
Another difference is how each will affect businesses. HB 3 exempts up to $250,000 of businesses’ personal property from taxation. At the same time, the Senate’s proposal sets aside $500 million for business tax cuts, but it’s yet to be determined how to deliver them.
Regardless of the proposal, according to the Texas Tribune, “Texas lawmakers are slated to spend at least $51 billion to maintain existing tax cuts, including property taxes… over the next two years.”
School Voucher Bills' Impact on School Funding
One concern is that public school funding could decrease if students leave public schools to use ESAs. This deficit could dilute the quality of education for certain public schools and districts.
Moreover, losing students would lead to local school districts needing to increase property tax rates to counteract this financial loss.
On the other hand, some school districts could see relief if state funding compensates for the diverted funds.
Nevertheless, it’s challenging to predict SB 2 or HB 3’s impact on property taxes because it’s unknown how many families will take advantage of the ESA programs and at what rate.
What is known is that many school districts, both urban and rural, are running deficits.
For instance, Austin ISD aims to grapple with a $92 million deficit over three years. Meanwhile, Dallas ISD and Houston ISD are tackling deficits of $152 million and $250 million, respectively. Both districts have eliminated positions to help reduce their deficits.
House Bill 8
Another bill on this year’s docket is House Bill 8 (HB 8), which the House introduced on February 24, 2025.
This bill focuses on reducing property taxes for Texas school districts by lowering the maximum compressed tax rate (MCR) for the 2025-2027 school year. Unless future legislation extends it, it’s a temporary one-year measurement expiring on September 1, 2027.
What is the Maximum Compressed Tax Rate (MCR)?
In Texas, school districts get some of their funding from property taxes. However, the state limits how much a district can tax property owners, i.e., the maximum compressed tax rate (MCR).
The idea behind tax rate compression is to lower this limit over time, meaning homeowners and businesses pay less in school property taxes.
HB 8 Changes and Impact
Property tax reduction: For the 2025-2026 school year, each school district’s MCR will be reduced by $0.0331 (about 3.31 cents per $100 of property value). This means property owners pay less in school taxes compared to before.
Fairness between districts: If reducing the MCR by $0.0331 makes a district's tax rate too low compared to others, the state ensures it does not drop below 90% of the rate of other districts. This helps prevent drastic tax collection differences between districts.
A lower tax rate will also carry over into future 2026-2027 school year funding calculations, further adjusting the prior year’s maximum compressed tax rate (PYMCR).
Impact on school funding: The bill ensures that state funding calculations reflect the new lower tax rates, so the change does not financially hurt schools.
The bill doesn’t explicitly state this benefit but references sections of the Texas Education and Tax Codes used in state funding calculations.
How These Bills Would Affect Your Property Taxes
In summary, if passed, Senate Bill 4 would increase the homestead exemption to $140,000, reducing taxable home values and saving homeowners an average of $363 annually.
House Bill 8 would lower school tax rates by 3.31 cents per $100 of property value, providing further relief.
Senate Bill 2 and House Bill 3’s school voucher programs could shift funding from public schools, potentially leading to local tax increases, but would give families leverage on where to send their children to school.
Timeline and Likelihood of Bills Passing
SB 4 (Homestead Exemption)
Some version of Senate Bill 4 will likely pass. However, it’s a constitutional amendment. Thus, voter approval will be required in the November general election. Given how most Texans feel about property taxes, it will likely pass.
SB 2 and HB 3 (School Vouchers)
Senate Bill 2 has already passed in the Texas Senate. House Bills 3, the chamber’s version, has been publicly backed by 76 lawmakers, giving it enough votes to pass.
Legislative hearings will begin soon before the House Public Education Committee. If the committee advances HB 3, it will move to the House Calendars Committee, which determines when the House will vote.
Governor Abbott has sworn to sign the bill into law if it is voted on and passed. Thus making it likely to pass.
HB 8 (Compression Rate for School Districts)
Morgan Meyer introduced the bill to the House on February 24. The House Ways and Means Committee has scheduled a hearing for March 3, 2025.
Of the four bills, HB 8 is in its most infant stage, but given how aggressive the legislature is toward property tax relief this session, it will likely pass.
Maximize Your Property Tax Savings with Ownwell
The Texas Legislature isn’t the only one trying to lower your property taxes.
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Additionally, we assist homeowners in securing retroactive homestead exemptions — unlocking refunds for past overpayments.
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