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Austin Raises Property Tax Exemption For Older, Disabled Homeowners; Gives Initial Approval For Citywide Break

Cars parked along a tree-lined street in the Crestview neighborhood of North Austin.
Gabriel C. Pérez
/
KUT
City Council on Thursday increased the homestead exemption for older and disabled homeowners from the current value, $88,000, to an amount not to exceed $113,000.

The Austin City Council on Thursday unanimously approved an increase to the amount that older and disabled homeowners can reduce from their property taxes.

The amount people with disabilities and those who are 65 or older can exclude from property taxes went up from $88,000 to $113,000.

Speaking before the vote, Council Member Ann Kitchen said it was important to address the affordability challenges that older and disabled homeowners face.

A speaker in favor of homestead exemption increases told council Thursday that his property taxes are now higher than his mortgage payments.

“This situation has become untenable,” especially for retirees and people on a fixed income, the speaker said.

Council members also gave preliminary approval on another homestead exemption measure — one that would reduce the taxable portion of every Austin homeowners’ property values. The measure was approved on first and second reading, but a final vote is still needed.

That ordinance would increase the tax-exempted portion of a home’s value from the current level of 10% to 20%, the maximum allowed by state law. That means homeowners would not have to pay property taxes on one-fifth of the value of their primary home.

If it's approved, city staff estimate the owner of a home valued at $400,000 would save about $141 a year on the city portion of their property taxes. The savings could change, though. City of Austin leaders will decide later this summer whether to raise property tax revenue and by how much.

Since state law requires the exemption to be percentage-based, the tax break would benefit those with more expensive homes the most. For example, the owner of a home valued at $200,000 will be able to exclude $40,000 from the amount they get taxed on, while the owner of a home worth $1 million will get to exclude $200,000 from taxes.

Council Member Greg Casar and others have expressed concern that lower-income homeowners won't get enough relief.

“The folks that are struggling the most that are homeowners get the least relief,” he said at a meeting Tuesday.

Until now, the City Council has been reluctant to raise the homestead exemption to the highest allowed by law. In 2016, council members raised it from 6% to 8%.

Those who voted against it did so, in part, because it meant a hit to Austin’s coffers. By making a portion of someone’s home value exempt from taxes, the city collects less revenue.

“That means cutting something, somewhere,” then-Council Member Delia Garza told her colleagues. “And I just hope we all understand the position we’re putting ourselves in.”

Despite having the same concerns two years later, council members again raised the homestead exemption, this time to 10%.

But according to city staff, the Texas comptroller recently began reinterpreting state law and how taxing entities should calculate exemptions. Now, raising Austin’s homestead exemption no longer means the city will collect fewer property taxes; instead, it can collect the same amount, with commercial owners and those with secondary residences footing more of the total bill.

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

Adler also acknowledged this could have an impact on renters, whose landlords may see their property taxes go up as a result. He said it would be no more than a couple dollars a month and argued Tuesday that landlords are more responsive to the market — or what people are willing to pay for rent — than their property tax bills.

“If a landlord can charge $1,425 or $1,450 in the market, they would already be doing that,” he said. (The average monthly rent in Austin hit $1,335 in April, marking a steady increase in prices since a pandemic-related dip.)

All totaled, Adler noted that increasing the city’s general homestead exemption would not be a panacea to Austin’s affordability problems.

“There are some people that are not getting the benefit … but on balance I think this is providing really important relief to people that need that relief,” he said.

This story has been updated.

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