Austin is growing the property tax exemption for householders to the best allowable price

With the average price of a house in Austin exceeding half a million dollars this year, city councilors voted Thursday to tax a lesser amount of homeowners’ home values.

City guides doubled the current general homestead exemption from 10 percent to 20 percent, the highest amount allowed under Texas law. This means that homeowners do not have to pay property tax on one fifth of the value of their primary residence.

The entire eleven-member council voted in favor of the increase.

City officials estimate that the owner of a $ 400,000 home will save about $ 141 in city property taxes annually. However, the savings could change. The city administration will decide in the course of the summer whether and to what extent the property tax revenue will be increased.

Last week, councilors approved an increase in the amount seniors and disabled people can exclude from property tax from $ 88,000 to $ 113,000.

As in previous discussions on changes to the homestead exemptions, councilors reiterated that the tax breaks will be felt most by those who own more expensive homes.

This fact made Councilor Greg Casar pause, even though he eventually voted to increase the homestead exemption.

“The people who struggle the most, the homeowners, get the slightest relief,” he said at a meeting last week.

Council members tentatively agreed to the relief on June 3. Casar asked them to suspend final approval so the council could pass the increase along with a vote on additional rental subsidies as non-homeowners do not receive the tax break that homestead exemption offers.

“Homestead exemption is a $ 25 million tax shift from homeowners, so I’d like to see if we could get an additional $ 20 million to $ 25 million in tenant assistance,” he said last Week.

Council members approved $ 20 million in tenant aid to supplement the million the city has already given to tenants affected by the pandemic.

National law requires that general homestead exemptions as opposed to specific population exemptions, such as the elderly, be expressed as a percentage. For example, a $ 200,000 home owner can exclude $ 40,000 from taxation, while a $ 1 million home owner can exclude $ 200,000 from tax.

So far, the city council has refused to increase the exemption to the maximum permitted by law. In 2016, the council members increased it from 6 to 8 percent.

Those who voted against did so in part because it hit Austin’s coffers. By exempting part of the home’s value from tax, the city generates less income.

“That means cutting something somewhere,” then councilor Delia Garza told her colleagues. “And I just hope that we all understand what position we put ourselves in.”

Despite the same concerns two years later, council members again increased the homestead leave, this time to 10 percent.

But according to city officials, the Texan auditor recently began reinterpreting state law and how tax authorities should calculate exemptions. Now, increasing the exemption on Austin’s homesteads no longer means the city will collect less property taxes; instead, it can collect the same amount by raising the tax rate, which means commercial owners and people with secondary residences pay a larger portion of the total bill.

“The burden … will fall on the higher-income owners and users of the large buildings we have, downtown and industrial properties and the like,” Mayor Steve Adler said at a meeting last week.

Adler also admitted that this could have an impact on tenants, whose landlords may see their property taxes rise as a result. He quantified that effect at no more than a few dollars a month and argued at a meeting last week that landlords respond better to the market – or what people are paying for rent – than they do to their property tax bills.

“If a landlord could ask for $ 1,425 or $ 1,450 in the market, they would already be,” he said. (The median monthly rent in Austin reached $ 1,335 in April, a steady increase in prices since a pandemic-induced slump.)

All in all, Adler found that increasing the general exemption from the city’s homesteads wasn’t a panacea for Austin’s affordability problems.

“There are some people who are not getting the benefits … but overall, I think that this provides really important relief to the people in need of this relief,” he said.

This story was produced as part of Austin Monitor’s reporting partnership with KUT.

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