COLLEGE STATION — Texas voters will be able to vote on a school property tax amendment on Aug. 9 that could have an impact on their homestead exemption and the tax freeze for people who are 65 years old or older.
Economist Dr. Judith Stallmann of College Station said House Bill 4, passed at the end of the recent legislative session, increases the residential homestead exemption from $5,000 to $15,000. Additionally, persons who are 65 years old or older will be able to transfer their tax freeze, with adjustments, from their current home to a subsequent home.
The homestead exemption applies only to homeowners — renters and landlords will not see benefits from it, the Texas Agricultural Extension Service economist said.
Increasing the homestead exemption by $10,000 will lower school property taxes by $140 for the average Texas homeowner. The actual amount will depend on the tax rate in each district. For example, in a school district with a tax rate of 1.23, the increased exemption will result in a tax savings of $123. The people who would benefit the most from the increased homestead exemption would be those who live in the highest tax rate districts, she said.
“People are concerned about their property taxes,” Stallmann said, “particularly the school property tax because it has doubled in the last 10 years.”
If passed, the increase in the homestead exemption will decrease tax revenues for local school districts, affecting school districts with a low tax base more than other districts because it may exempt a larger percentage of their taxable value, she said.
Lower school property tax revenues from this amendment would be offset by about $1 billion set aside by the state for this purpose over the next biennium. Beyond that, elected officials are not sure how the losses would be handled.
These lower revenues are “certainly a concern that school districts are going to have to address,” she said. Citizens may want to contact their state representative to find out how this is going to be addressed in the future, she suggested.
The proposed amendment also includes a revision of the tax code for senior citizens. Currently, homeowners over 65 years old receive a tax freeze on their home as long as they live in the house and do not make significant improvements. If the person buys and moves to another house, he or she has to requalify for the tax freeze. Approximately 10 percent of the state’s population is over 65 years of age.
Under the proposed amendment, the tax freeze is “portable,” Stallmann said. If the person moves to another house, the original tax freeze, with some adjustments, applies to the new home.
The adjustment is made on a percentage basis. If the tax bill on the original home is 60 percent of what it would be without the freeze, the tax bill for the new home will be 60 percent of what the tax bill would otherwise be.
Stallmann did not foresee this tax freeze change having a big impact on school districts in the immediate future because the number of people over 65 who change homes in a single year is not significant. Over time, however, the numbers could become significant and the impact on tax revenues may be greater as “baby boomers” begin to age and retire.
Voters should determine several things before voting on this amendment, Stallmann suggested. First of all, they should estimate the impact on their current tax bill and on their tax bill when they turn 65. They also need to consider the impact on local tax revenues and schools in the future. Additionally, they should consider whether the constitutional amendment is preferable to exercising the local options that are available.