Tuesday, July 6, 2021 by Seth Smalley

County increases homestead exemptions for 65 and up

On June 29, the Travis County Commissioners Court discussed and passed a proposal to increase homestead exemptions for qualifying homes.

The item was a follow-up to the previous week’s discussion in which the Planning and Budget Office had recommended to increase homestead exemptions from $85,000 to $100,000 for the 65-and-up age group, as well as for disabled people.

A homestead exemption, for the less financially savvy, is a tax exemption that can be applied to a person’s primary residence. For example, a home valued at $450,000, with a $100,000 homestead exemption applied, would be taxed as if the home were worth $350,000.

The proposed exemption would be an increase of $14,500 over the previous year. The last time the exemption was changed was two years ago, in 2019.

“We estimate that the tax savings in the final bill for those that are 65 and older or disabled that had this homestead exemption, would be $54 less than if you did not change the exemption,” said Travis Gatlin with the Planning and Budget Office.

Gatlin added that the exemption may cause a slight shift in the tax burden, from those who are seniors and disabled to those who aren’t.

“For the average taxable homestead, we think that could be about $6.50 more in the final tax bill compared to if you kept the $85,500,” Gatlin told commissioners.

Another option discussed was increasing the homestead exemption by $27,500 to $113,000 – which is being implemented by the city of Austin – as opposed to just a $14,500 exemption increase.

In this case, estimated savings for qualifying homesteads would be $102, while non-qualifying homesteads would pay about $12 more in taxes, on average.

Commissioner Margaret Gómez asked about the possibility of a tax freeze, “because I’ve been told that these homestead increases don’t really help in the long run if there isn’t a tax freeze.”

The Planning and Budget Office had not recommended a tax freeze in 2017 due to the approximately $1.5 million decrease in revenue, Gatlin explained, while a similar freeze in 2021 would have impacted the budget by $4 million.

“So we do have some concerns about whether or not it would be affordable,” Gatlin said, also arguing that a tax ceiling would have a regressive effect on tax savings, benefiting those with higher value homes more.

Though there was no revenue impact to the county depending on whether or not commissioners went with the $100,000 or $113,000 exemption plan, Gatlin warned that home taxes might be higher this upcoming year, given the skyrocketing Austin home prices.

“When we talked about affordability, we talked about that in terms of all taxpayers and so we’re mindful that tax bill may be higher,” Gatlin said. He went on to advocate for the $100,000 exemption plan, which would increase taxes by $6.50 for the non-exempt, and decrease them by $54 for the exempt, as opposed to the $113,000 exemption plan, which would increase taxes by $12 for the non-exempt and decrease them by $102 for the exempt.

He also advocated for a policy that would allow for incremental and targeted changes to the homestead exemption each year, “based on what the data is showing,” as opposed to a uniform exemption percentage.

Commissioner Brigid Shea emphasized the importance of understanding how the tax burden will be shifted for different groups. She underscored one probability, that the tax burden could be shifted significantly from commercial to residential property owners due to commercial property owners arguing their property is worth less as a result of Covid’s effects on business.

“It’s a terribly unfortunate impact of the way the state of Texas chooses to tax people. I do think an income tax is much more equitable because it’s based on one’s ability to pay,” Shea said.

Shea made a motion in favor of the $14,500 homestead exemption increase to $100,000; it passed unanimously.

Photo made available through a Creative Commons license.

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Key Players & Topics In This Article

property tax exemptions: Generally, discounts on homeowners' property tax bills. This can refer to elective such elective status as historic discounts and the broad discount offered by Travis County and other entities for a property owner's homestead. That exemption, called the Homestead Exemption, is offered for homeowners who occupy the home in question.

Travis County Commissioners Court: The legislative body for Travis County. It includes representatives from the four Travis County Precincts, as well as the County Judge. The County Judge serves as the chair of the Court.

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