Texas legislature reaches property tax deal, avoiding another showdown

As the Texas Legislature heads toward its final days of the 2025 session, lawmakers have struck a deal on property tax relief that could prevent a repeat of the contentious property tax battle of 2023. With the legislative session set to adjourn on June 2, the House and Senate have successfully agreed on two major components related to property taxes — homestead exemptions and business property exemptions — well ahead of the final deadline.

State Sen. Paul Bettencourt (R-Houston) shared the news at a Senate Local Government Committee hearing on Monday, revealing that both the Senate and the House had come to terms on two key elements of the tax relief package.

“I’m happy to note that we have agreement between the Senate and the House on the exemption bills,” Bettencourt said. “The homestead exemptions that we passed earlier are being heard in the House Ways & Means Committee today.”

The key details of the agreement are as follows:

Homestead Exemption Increases:

The standard homestead exemption will increase to $140,000, a $40,000 bump from the previous amount.

The homestead exemption for elderly and disabled Texans will rise to $60,000, a $50,000 increase.

Business Personal Property (BPP) Tax Exemption:

The business personal property exemption — which applies to inventory and all other property owned by a business, excluding the land itself — will increase to $125,000, a substantial jump from the current $2,500 exemption.

For homeowners over the age of 65, the total homestead exemption could reach $200,000, as the elderly and disabled exemption will be stacked on top of the standard exemption.

The agreement follows a lengthy back-and-forth between the two chambers. The House initially passed a much higher $250,000 BPP exemption, while the Senate pushed for a more modest $25,000 exemption paired with an inventory tax credit. The compromise reached was a middle ground of $125,000 for the BPP exemption.

This deal comes after the Texas Senate passed an increase to the elderly homestead exemption last month, with Lt. Gov. Dan Patrick working closely with Speaker Dustin Burrows (R-Lubbock) to secure consensus. The Senate had advocated for the $40,000 increase to the standard homestead exemption from the outset of the session.

Importantly, both the standard homestead exemption and the BPP exemption will require voter approval in the November 2025 election. Additionally, the state will reimburse school districts for any lost tax revenue due to these exemption increases.

State Rep. Morgan Meyer (R-Dallas), chairman of the House Ways & Means Committee, praised the collaborative effort. “I just wanted to thank the lieutenant governor, Chairman Bettencourt, Speaker Burrows, and Governor Abbott for all of us working together to provide meaningful property tax relief,” Meyer said. “I’m glad we got this job done.”

The deal was also well received by business leaders. Glenn Hamer, president of the Texas Association of Business, expressed his support, noting that the agreement strikes a good balance between providing relief for both homeowners and businesses. “Because of your leadership, Texas will remain the best place for business in the country,” Hamer said.

While progress has been made on the exemption front, one critical aspect of the property tax discussion remains unresolved: tax rate compression. This refers to efforts to reduce school district tax rates, which would lower overall property tax bills. The House’s version of the budget proposes a three-cent reduction in the school tax rate, a move expected to cost the state around $2.8 billion.

Both the House and Senate have allocated around $6.5 billion for property tax relief in their respective budgets, which are still under negotiation in conference committee. Governor Greg Abbott, however, has called for a more substantial $10 billion total in tax relief.

Despite these ongoing negotiations, the agreement on property tax exemptions marks a significant step forward and reflects a concerted effort to avoid the bitter disputes that marred the 2023 legislative session. That year, disagreements over homestead exemptions and appraisal caps led to the need for two special sessions and considerable political gridlock.

With the clock ticking down to the end of the session, lawmakers have made it clear that they are committed to avoiding a repeat of the 2023 standoff. The path forward looks clearer, but key decisions on tax rate reductions and the final budget are still in the works as the June 2 deadline approaches.