Texas Homestead Exemption 2025: What Homeowners Need to Know

Texas homeowners could soon see significant property tax relief as the 89th Texas Legislature considers major changes to homestead exemptions and school district tax rates. On February 13, 2025, the Texas Senate has unanimously passed Senate Bill 4 (SB 4) and Senate Joint Resolution 2 (SJR 2), while the Texas House of Representatives has proposed its own changes through House Bill 8 (HB 8). Here’s a breakdown of these legislative efforts and what they mean for homeowners.

Senate Bill 4: A Historic Homestead Exemption Increase

SB 4, authored by Senator Paul Bettencourt (R-Houston) and backed by Lieutenant Governor Dan Patrick, proposes to increase the homestead exemption from $100,000 to $140,000. This marks the largest homestead exemption increase in Texas history. The measure, which passed the Senate with unanimous support (30-0), is now awaiting approval in the House.

Key Benefits of SB 4:

• Increased Tax Savings: The average homeowner is expected to save nearly $363 per year, with additional tax compression bringing total savings to approximately $500.
• Relief for Seniors: With many Texas seniors living on fixed incomes, this increase will significantly reduce or even eliminate school property taxes for a large percentage of senior homeowners. Charles Scoma of the Texas Silver-Haired Legislature estimates that 80-90% of seniors will pay no school property taxes if this bill passes.
• School Funding Protection: SB 4 includes a "hold-harmless" provision, ensuring that school districts will not lose funding due to the increased exemption. The state will fully cover any shortfalls in school revenue.
• Further Tax Compression: SB 4 works alongside Senate Bill 1, which provides an additional 6.8 pennies of school district maintenance and operations (M&O) tax rate compression. This results in an estimated additional $133 in savings for the average homeowner.
• Effective from 2025 Tax Year: If passed by the House and approved by voters in November 2025, the new homestead exemption will apply retroactively to the 2025 tax year.

The Bigger Picture: Building on 2023 Tax Cuts

This proposed exemption increase follows the historic $22.7 billion property tax reduction approved by Texas voters in November 2023 through SB 2. When combined, tax cuts from 2023 and 2025 could save the average homeowner a total of $1,762.87.

Impact on School Districts

In 49% of Texas school districts (492 total districts), the new $140,000 homestead exemption would mean that the average homeowner would pay no school property taxes at all. This is a major shift in Texas’s approach to funding public education and reducing property tax burdens on homeowners.

House Bill 8: Focus on M&O Tax Rate Compression

While the Texas Senate focuses on increasing the homestead exemption, the Texas House is prioritizing further M&O tax rate compression through HB 8, authored by Representative Morgan Meyer. Instead of solely relying on an exemption increase, this measure aims to lower school tax rates by reducing the amount homeowners pay per $100 of property value.

Key Provisions of HB 8:

• School Tax Rate Reduction: HB 8 mandates a $0.0331 reduction in the maximum compressed tax rate (MCR) for school districts in the 2025-2026 school year.
• Equity Adjustment: Ensures that no school district’s MCR falls below 90% of another district’s rate.
• State Funding Protection: The state will adjust school funding calculations to reflect the reduced tax rate, preventing districts from losing revenue due to the compression.
• Temporary Measure: HB 8 is set to expire on September 1, 2027, with its impact on future tax rates dependent on additional legislative action.

Key Differences Between SB 4 and HB 8:

What Happens Next?

With SB 4 passing the Senate and HB 8 under discussion in the House, both chambers will need to negotiate a final version of the property tax relief plan. The House may amend SB 4 or incorporate its provisions into HB 8 before sending it back to the Senate. If both chambers agree, Texas voters will have the opportunity to approve these changes in a constitutional amendment election in November 2025.

What Homeowners Should Watch For:

• Legislative Negotiations: Will the House agree to the $140,000 exemption, or will they push for more tax rate compression instead?
• Final Tax Savings Estimates: As bills are finalized, homeowners should review how much they stand to save under each proposal.
• November 2025 Election: If SB 4 is passed by both chambers, Texans will need to vote in favor of the constitutional amendment for the exemption increase to take effect.

Conclusion

Texas lawmakers are actively working to provide significant property tax relief for homeowners, but the final shape of that relief is still up for debate. Whether through an increased homestead exemption, further school tax rate compression, or a combination of both, homeowners stand to benefit from these legislative changes. Stay informed and be prepared to vote in November 2025 to secure long-term property tax reductions.

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