New Property Tax Law in Texas: $140K Homestead and 20% Cap

The new property tax law in Texas raised the school district homestead exemption to $140,000, compressed school tax rates statewide, and created a first-ever appraisal cap for many non-homestead properties. These changes came through Senate Bill 2 in 2023 and Senate Bill 4 in 2025, both ratified by voters as constitutional amendments, so the relief is locked into the Texas Constitution rather than left to local discretion.¹²

The $140,000 Homestead Exemption

The residence homestead exemption for school district taxes climbed in two steps. SB 2, passed during the 88th Legislature’s second called session in 2023, took it from $40,000 to $100,000. SB 4, passed by the 89th Legislature in 2025, pushed it to $140,000 for the 2025 tax year and beyond.²

The math is simple. Subtract $140,000 from your home’s appraised value, and the school district applies its rate to what’s left. A home appraised at $350,000 is taxed on $210,000 for school purposes. A home appraised at $250,000 is taxed on $110,000. The state reimburses school districts for the lost revenue, so classroom funding is not affected.

Both increases required amending the state constitution. Voters approved Proposition 4 in November 2023 for the first bump³ and Proposition 13 in May 2025 for the second. Because the numbers now sit in the constitution, no school board or future legislative session can lower them without another statewide vote.

One boundary matters here. The $140,000 exemption applies only to the school district portion of your bill. Counties, cities, and special districts have their own, much smaller exemptions. When you open your bill and see multiple line items, the big exemption reduces only the school line.

Compressed School District Tax Rates

The exemption reduces the taxable value. Compression reduces the rate. Under SB 2 and the Texas Education Code, the state allocated billions of dollars to replace local school property tax revenue with state funds, letting districts charge a lower maintenance and operations rate without cutting their budgets.

The Texas Education Agency sets a maximum compressed rate for each district each year.⁴ For 2025, that rate ran from roughly $0.57 to $0.63 per $100 of taxable value, depending on the district. Before the reforms, many districts sat at $0.90 or higher on the same line. Because compression applies to the rate, not to any exemption, every kind of property in the district benefits: commercial buildings, rental homes, and vacant land included.

Your school taxes actually have two rates on the bill. Maintenance and operations funds day-to-day costs like teacher salaries and utilities. Interest and sinking pays off bonds voters approved for construction and other capital projects. Only the maintenance and operations rate is compressed. If your district passed a bond recently, the interest and sinking rate may have climbed at the same time the other rate fell, which can eat into the total savings you see.

The New 20 Percent Cap on Non-Homestead Property

For the first time, Texas capped how fast appraisals can rise on non-homestead real property: commercial buildings, rental houses, second homes, and vacant land. Under Tax Code Section 23.231, the appraised value of a qualifying property cannot increase by more than 20 percent in a year.⁵

Eligibility depends on value. The property must be at or below a ceiling that the Comptroller adjusts each year for inflation. The ceiling was $5 million for 2024, $5,160,000 for 2025, and $5,320,000 for 2026.⁶ Properties valued above the ceiling are excluded, as are properties already receiving special-use appraisal such as agricultural or timber land.

This cap is not permanent. It is currently scheduled to expire after the 2026 tax year. HB 202 in the 89th Legislature sought to make it permanent, but that effort required a separate constitutional amendment and had not been finalized as of this writing. If the cap sunsets, non-homestead properties return to uncapped appraisal growth beginning in 2027. Landlords and small commercial owners should watch the legislature on this one.

The cap also does not travel with the property. It follows the owner. A buyer starts fresh at full market value in the first year of ownership and picks up the 20 percent limit beginning in the second year.⁵

Homesteads have their own, older cap under Tax Code Section 23.23: 10 percent per year, plus the value of new construction, starting in the second year you own and homestead the property. The recent legislation did not change that rule, but it continues to work alongside the new exemption.

What Changes for Seniors and Disabled Homeowners

Homeowners age 65 or older, and homeowners with a qualifying disability, already had a school tax ceiling that freezes the dollar amount of school taxes at the level of the year they first qualified. A frozen dollar amount could have blocked these owners from feeling the new rates and the higher exemption at all.

The legislature caught this. SB 2 required existing ceilings to be recalculated downward, reflecting both the compressed rates and the larger exemption. In practice, the state computed what each senior or disabled homeowner would have owed under the new numbers with no freeze, then reset the ceiling to that lower figure. The freeze still caps future increases, but from a smaller starting point.

Seniors and disabled homeowners stack their additional exemptions on top of the $140,000 school exemption. Under Tax Code Section 11.13, a homeowner who is 65 or older gets an extra $10,000 school district exemption, plus any additional local exemptions offered by the county, city, or special district.⁷ A disabled homeowner who later turns 65 cannot claim both the over-65 and the disability exemption from the same taxing unit in the same year, but the two can be split across different taxing units where each applies.

Making Sure Your Homestead Exemption Is On File

None of this relief lands on your bill automatically unless you have a homestead exemption on record. If you already filed with your county appraisal district, you do not need to refile. The higher exemption amount applies to every existing homestead without any action on your part.

If you recently bought, moved to Texas, or never filed, the deadline is before May 1 of the tax year.⁸ You can file late for up to two years past the deadline and still receive the exemption retroactively. The application goes to your county’s central appraisal district, not your city or school district.

Qualifying is a matter of ownership and primary residence. Texas does not impose a strict day-count requirement, but the appraisal district looks at your voter registration, your driver’s license address, and where you actually live. You can only claim one homestead statewide. If you own two homes in Texas, pick one. Claiming a homestead exemption on a property that is not your primary residence carries a 50 percent penalty on the taxes owed, and appraisal districts do audit.

How the Savings Reach You If You Have a Mortgage

If your mortgage servicer collects property taxes through escrow, the savings from the new law will not appear as a check in the mail. They show up as a lower escrow payment after your servicer runs its next annual escrow analysis. Under federal rules, the servicer must review the account at least once every 12 months and adjust your monthly payment to reflect the new tax bill.⁹

If the analysis shows a surplus of $50 or more, the servicer must refund it within 30 days. Smaller surpluses can be refunded or credited to next year’s escrow. Timing depends on when your lender runs its cycle, which is why some homeowners see the adjustment quickly and others wait several months. If you want a specific date, call the servicer and ask when your next escrow analysis is scheduled.

Elected Members on Appraisal District Boards

The 2023 reforms also changed who oversees the offices that set your property’s value. In counties with populations of 75,000 or more, appraisal district boards now include three members elected by voters. Previously, every board member was appointed by local taxing entities like cities and school districts. The new board has nine directors: five appointed by taxing units, three elected at the general election, and the county tax assessor-collector serving as an automatic member.¹⁰

The elected seats carry staggered four-year terms starting January 1 of every other odd-numbered year. A candidate must live in the appraisal district and have done so for at least two years before taking office. The first elections under this structure are taking place in 2026, giving property owners a direct vote on the part of the system that generates the most friction: the appraisal itself.

1
Texas Legislature Online. Texas Senate Bill 2 – Property Tax Relief Act
2
Texas Legislature Online. 89th Legislature SB 4 – Enrolled Version
3
Texas State Law Library. Texas Voters Approve New Constitutional Amendments
4
State of Texas. Texas Education Code Section 48-2551 – Maximum Compressed Tax Rate
5
State of Texas. Texas Tax Code Section 23-231 – Circuit Breaker Limitation on Appraised Value of Real Property Other Than Residence Homestead
6
Bexar Central Appraisal District. Circuit Breaker Limitation on Non-Resident Homestead Property Value Increases
7
State of Texas. Texas Tax Code Section 11-13 – Residence Homestead
8
Texas Comptroller of Public Accounts. Property Tax Exemptions
9
Consumer Financial Protection Bureau. Regulation 1024-17 Escrow Accounts
10
Texas Secretary of State. Running for County Appraisal Districts in 2026