On August 9, 2023, Texas Governor Greg Abbott signed into law the largest property tax cut in the state’s history—a sweeping $18 billion package aimed at easing the tax burden on homeowners while stimulating long-term economic growth. The legislation marks a turning point in the state’s approach to property tax policy, with significant implications for homeowners, businesses, and school funding alike.
But beyond the headlines, what exactly does this massive tax relief entail? And what should Texas residents expect as the changes take effect?
Breaking Down the $18 Billion Tax Package
The heart of the legislation centers on school property taxes, which typically make up the largest share of a homeowner’s annual bill. The $18 billion in relief is divided among several key components:
- $12.7 billion is allocated to compress school district maintenance and operations (M&O) tax rates across the board. This reduction means school districts will collect less from property taxes, lowering the tax burden on individual property owners.
- $5.3 billion is dedicated to increasing the homestead exemption—the portion of a home’s value that is not subject to property taxes—from $40,000 to $100,000. This change significantly reduces the taxable value of owner-occupied homes.
- Additional provisions create appraisal caps for certain non-homestead properties valued under $5 million, offering small businesses some protection against sudden spikes in property value assessments.
Together, these changes aim to provide both immediate relief and structural reform, curbing the rapid increase in property taxes that many Texans have faced over the past decade.
Who Will Benefit the Most?
The tax relief primarily targets Texas homeowners, especially those who qualify for the expanded homestead exemption. For a median-priced home in Texas—valued at around $330,000—the exemption increase alone could reduce the property tax bill by several hundred dollars per year.
Retirees, disabled homeowners, and those on fixed incomes stand to gain even more. Because their school district tax rates are typically frozen under existing laws, the expanded exemption directly lowers their overall tax liability.
Small business owners with lower-value commercial properties also benefit from new limits on annual appraisal increases, creating more predictability in their operating costs.
Why Was This Tax Cut Introduced?
The property tax relief was made possible by a record state budget surplus in 2023. As the Texas economy surged, driven by strong energy revenues and population growth, the state accumulated excess funds. Rather than expand state programs, lawmakers prioritized returning that surplus to taxpayers through direct tax relief.
Governor Abbott described the move as “transformational,” framing it as part of his broader commitment to keeping Texas affordable and business-friendly. The bill was the result of extended negotiations between state legislative leaders, ultimately uniting behind a shared goal: easing the financial pressure on property owners without undercutting school funding.
What Homeowners Should Do Now
With the new legislation in effect, homeowners can take a few practical steps to ensure they benefit from the changes:
- Confirm your homestead exemption status through your county appraisal district. The increased exemption only applies to owner-occupied primary residences.
- Check your 2024 property tax appraisal for changes reflecting the updated rates and exemptions.
- Contact your local tax office or financial advisor for personalized guidance if you’re unsure how the changes apply to your property.
It’s also wise to keep an eye on future property appraisals. While tax rates may decline, rising home values can still impact overall tax bills, so monitoring both is essential for long-term planning.
Looking Ahead: What’s Next for Texas Tax Policy?
While the relief package brings substantial short-term savings, it also raises questions about the long-term sustainability of school funding. With less revenue from property taxes, the state must find ways to ensure consistent support for public education.
That challenge, however, will unfold over the coming years. For now, millions of Texans can expect real relief—especially those most affected by rising property values and fixed incomes.
Conclusion: Relief for Today, Reform for Tomorrow
August 9, 2023, will be remembered as a milestone in Texas fiscal policy. With the signing of the $18 billion property tax cut, the state delivered on a promise to make homeownership more affordable and property taxes more manageable.
For homeowners, this marks a rare and welcome moment: meaningful relief, backed by long-term reform. The key now is to stay informed, prepared, and proactive as the changes begin to take hold across Texas.
