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Residential Homestead Exemption for School Districts Increases to $25,000 for 2015

S.B. 1, effective as of January 1, 2015, with its enabling constitutional amendment being given approval by the voters in November 2015, has been implemented. The homestead exemption mandated for school districts has increased from $15,000 to $25,000. The net effect of the higher exemption amount is the lowering of school taxes in the range of -$135 to -$160 for 2015, compared to what the 2015 taxes would have been without the increase to the exemption. What many homeowners will see is “less of an increase”, not a reduction compared to what they paid last year. This is dependent on two factors, how much the appraised value of their home increased for 2015 and the final tax rate adopted by the school district. The exception to this would be those qualified for a 65&over or Disabled person homestead, with a tax limitation (freeze ceiling in place), since their 2015 “frozen tax” will be based on a formula using the 2014 “frozen tax”, less the tax savings caused by the increased exemption amount.

The legislation requires that those accounts that qualify for the 65&over or disabled persons homestead exemption in 2015, with their first year of qualification for the exemption in 2014 or prior, will have their tax limitation lowered. The tax limitation, which is often called a “tax freeze” or “tax ceiling”, will have their tax limitation (ceiling) amount lowered by multiplying $10,000 times the school district’s 2015 tax rate and subtracting the calculated amount from the existing limitation (ceiling).

Note: It must be noted that the Tax Code allows for limitations to be increased if an “individual makes improvements to the individual’s residence homestead, other than improvements required to comply with governmental requirements or repairs.” Examples of this could be adding a swimming pool, adding a new structure, add-on to an existing structure or renovations beyond normal repairs and maintenance.

From this point forward S.B. 1 deals with the assessing function, Effective Tax Rate calculations, the tax collection function and School District funding by the State. CCAD does not perform these duties but the following is based on our reading of S.B. 1.

  • The Tax Assessor shall determine the 2015 taxable value for each school district based on the $25,000 exemption being in place.
  • The officer or employee designated by the school district (often the Tax Assessor/Collector) shall calculate the 2015 Effective Tax Rate and Rollback Tax Rate based on the $25,000 exemption being in place.
  • The 2015 tax bill must contain language that shows the amount of tax that would have been due had the legislature not increased the exemption amount. Then it must show the amount the Legislature lowered the tax bill. Then it must contain language about the resulting lower tax bill, showing the lowered amount due.
  • If the voters do not approve the constitutional amendment in November the entire process will be reversed and tax bills for the difference in tax due will be mailed.
  • State funding and/or additional State aid for school districts under S.B. 1 are outside the scope and understanding of CCAD staff. This level of question should be directed to either school administrators, officials at the Texas Education Agency, officials at the Comptroller’s office or the Texas Legislature that deal with the Education Code, and funding of Texas School Districts.