Proposing a constitutional amendment authorizing the legislature to provide that the appraised value of a residence homestead for ad valorem tax purposes for the first tax year that the owner of the property qualifies the property for a residence homestead exemption is the market value of the property and that, if the owner purchased the property, the purchase price of the property is considered to be the market value of the property for that tax year and to limit increases in the appraised value of the homestead for subsequent tax years based on the market value of all new improvements to the property.

89th Legislature, 2nd Called Session (2025) Introduced by Shelley Luther

Constitutional amendment would cap homestead property tax appraisals at initial market value with increases limited only to new improvements, reducing taxes for existing homeowners but potentially decreasing school funding and burdening new buyers.

Filed

#propertyinterests--homestead(i0616) #resolutions--constitutionalamendments(i0661) #taxation--property-appraisals&appraisaldistricts(i0792) #taxation--property-exemptions(i0793)

Legislative bill overview

This proposed constitutional amendment would change how Texas assesses property taxes on homesteads. It would allow the legislature to set a homestead's initial appraised value at its market value (or purchase price if recently bought), and then limit future appraisal increases to only the value of new improvements made to the property, rather than reassessing the entire property's market value annually.

Why is this important

Homestead property tax assessments significantly impact homeowners' tax bills and housing affordability. This change would potentially lock in lower tax bases for existing homeowners, reducing their annual tax increases, while potentially shifting more of the tax burden to commercial properties, renters (through landlord costs), and new homebuyers entering the market.

Potential points of contention

School funding impact: Texas relies heavily on property tax revenue for public schools; this could reduce available funding unless offset by other revenue sources or tax rate changes

Market-to-market volatility: Using purchase price as market value ignores situations where properties purchased years ago are now worth significantly more, potentially creating inequities among similar neighboring properties

New versus existing homeowner fairness: Existing homeowners would benefit from capped increases while new buyers would pay market rates, potentially discouraging home purchases and market mobility

Implementation complexity: Determining "new improvements" versus maintenance or normal wear requires clear definitions and administrative oversight