The Texas Proposition 2 child care property tax exemption lets cities and counties exempt between 50 and 100 percent of the appraised value of real property used to run a qualifying child-care facility. Voters approved the constitutional amendment in November 2023, adding Section 1-r to Article VIII of the Texas Constitution.1Texas State Law Library. Texas Voters Approve 13 New Constitutional Amendments It does not apply automatically. Your city or county must formally adopt it before any facility inside that jurisdiction can claim the reduction.
How the Exemption Works
Each county or municipal governing body chooses whether to adopt the exemption and at what percentage. The floor is 50 percent and the ceiling is 100 percent; nothing lower is allowed.2State of Texas. Texas Tax Code 11.37 – Child-Care Facilities If your facility sits inside both a city and a county that have each adopted it, you get a reduction on both tax bills, and the percentages don’t have to match.
The implementing statute is Texas Tax Code Section 11.37. Licensing alone will not get you the exemption. The law stacks several conditions, and missing any one of them disqualifies the property.
Who Qualifies
Three requirements must all be satisfied:
- A current license from the Texas Health and Human Services Commission. The statute defines a child-care facility as one HHSC-licensed to provide care, education, or supervision for children who are not related to the owner or operator.2State of Texas. Texas Tax Code 11.37 – Child-Care Facilities
- Participation in the Texas Workforce Commission’s Texas Rising Star Program. Entry Level participation is enough; higher star ratings exist but aren’t required.3Texas Workforce Commission. Texas Rising Star Program
- At least 20 percent of enrolled children receiving subsidized child-care services through TWC’s Child Care Services program.2State of Texas. Texas Tax Code 11.37 – Child-Care Facilities
The 20 percent threshold is the one most likely to trip up operators. Track that ratio throughout the year. If subsidized enrollment slips below 20 percent, the exemption is at risk, no matter how clean the licensing and Rising Star status.
Property Use
The property must be used exclusively to provide developmental and educational services for the children attending the facility, and it must be reasonably necessary for the operation. Incidental uses that benefit enrolled children or the staff and faculty, such as a teacher break room or shared parking, do not disqualify the property.2State of Texas. Texas Tax Code 11.37 – Child-Care Facilities When only part of a property is used for child care, the exemption applies only to that portion; the rest is taxed at full appraised value.
Home-Based Providers
Licensed home-based facilities are eligible. Registered child-care homes are not; the “licensed” category meets a higher HHSC regulatory standard than a “registered” one.4Texas Workforce Commission. Property Tax Exemptions for Certain Child Care Facilities There’s also a practical catch: a home-based provider cannot claim both the standard residence homestead exemption and the child-care facility exemption on the same property. The homestead exemption is usually the more valuable of the two, which prices most home-based providers out of this benefit.
Leased Property and the Rent Pass-Through
The exemption applies to leased space, but the landlord has to pass the savings to the child-care tenant. The property owner must file a sworn affidavit (Comptroller Form 50-845) along with the main application, certifying three things:2State of Texas. Texas Tax Code 11.37 – Child-Care Facilities
- The owner has given the tenant a written document showing the dollar amount of the tax savings and how those savings will be passed through.
- The rent reflects the tax reduction through a monthly or annual credit; the landlord cannot keep the savings.
- The total rent does not exceed what other tenants pay for comparable space in the same building, or for standalone properties, the average rent for comparable properties in the area.
If you operate on leased space, ask your landlord for the disclosure document. A landlord who claims the exemption without passing the savings through has violated the affidavit filed with the appraisal district.
How to Apply
Applications go to the county appraisal district where the property sits, not to the Comptroller or to city or county government. File in each county where you have qualifying property.
The primary form is Comptroller Form 50-844, the Application for Child-Care Facility Property Tax Exemption.5Texas Comptroller of Public Accounts. Application for Child-Care Facility Property Tax Exemption You’ll need the property owner’s legal name, the property account number assigned by the appraisal district, and the facility’s HHSC license number. Attach a copy of the current license and floor plans showing which areas are dedicated to child care, since the appraiser uses those to calculate the exemption when only part of the property qualifies.
Leased properties also require Comptroller Form 50-845, the Child-Care Facility Exemption Affidavit, completed and notarized by the property owner and submitted with Form 50-844.6Texas Comptroller of Public Accounts. Child-Care Facility Exemption Affidavit Both forms are available from the Comptroller’s website and from county appraisal district offices.
Deadline
The general filing deadline for Texas property tax exemption applications is April 30 of the tax year. If you miss it, call the appraisal district. Late filing is accepted for some exemption types up to certain deadlines, with rules that vary by category.
Renewal
You generally don’t need to reapply each year. Once granted, the exemption stays in place unless the property changes ownership or the facility stops meeting the eligibility requirements. The chief appraiser can send a written notice asking you to file a new application to reconfirm eligibility, but without that notice, no annual filing is required.7Travis Central Appraisal District. Child Care
Where the Exemption Is Available
Because adoption is local, the benefit exists only where your city or county has acted. As of early 2024, jurisdictions that had adopted the exemption included San Antonio, the Dallas area, the Austin area, the Houston area, El Paso County, the City of Denton, Hays County, and Aransas County. More have continued to adopt it. Your county appraisal district can confirm whether the city and county covering your facility have opted in, and at what percentage. If neither has adopted it, the statute and amendment have no effect on your tax bill.
Stacking the Federal Employer-Provided Child Care Credit
If you operate or contract with a child-care center as an employer, you can claim the federal credit under Section 45F of the Internal Revenue Code on top of the Texas exemption. The credit is 40 percent of qualified child-care expenditures, or 50 percent for an eligible small business, capped at $500,000 annually for most employers and $600,000 for eligible small businesses.8Office of the Law Revision Counsel. 26 USC 45F – Employer-Provided Child Care Credit
Qualified expenses include building, expanding, or operating a child-care facility, as well as contracting with licensed off-site providers. If the facility is the employer’s principal business, at least 30 percent of enrolled children must be dependents of the employer’s workers. The credit is claimed on IRS Form 8882.