Landlords would qualify for the reduction in school property taxes.
Rental properties valued under $5 million each also would qualify for the year-over-year 20% cap on appraisal values for the next three years.
Here’s an example of how this would work for a residential landlord. The owner of several duplexes in a high-demand neighborhood on Austin’s central eastside saw one of his properties jump in value by 54%, from $359,000 in 2021 to $554,000 in 2022. This year, the property’s value actually decreased slightly, which means he wouldn’t need the 20% appraisal cap.
But his school taxes in the Austin Independent School District would still drop by 10.7 cents per $100 of property valuation, potentially saving him close to $600 per year in property taxes.
Whether he chooses to pass the savings along to his renters is his decision and not a requirement in the bill.
Now let’s look at a commercial landlord. In Brenham, the Mars & Space Investment LLC owns a 1.3-acre property that has a laundromat, a tax services group, a pest-control business, a gas station and convenience store and a donut shop on Alamo Street near downtown.
The value of the strip, with the land and buildings, shot up from $373,000 in 2021 to $770,000 in 2022 — a whopping 106% increase. It was valued at $972,430 this year, a 26% increase over 2022.
The company would be able to benefit some from the 20% cap if the property’s appraisal, which is currently being protested by the owners, doesn’t decrease.
People who pay rent to a landlord for their home are not guaranteed any tax cuts from the new property tax package unless their rent is tied at least in part to tax rates, which is rare in residential leases.
The proposed law does not require landlords to pass along any savings from property taxes to the occupants of the property. Democratic lawmakers tried to add a provision allowing renters to claim tax rebates tied to their incomes, but the effort failed.
Supporters of the package say that the appraisal cap on small business properties would allow landlords to avoid increasing rents at the pace they’ve been rising in recent years, and that the market resulting from lower appraisals would help drive down prices through competition.
But critics of this argument say that the housing crisis in Texas is driving rent costs more than property taxes, so whether renters would ultimately benefit from the tax cuts remains unclear.
This article was written by KAREN BROOKS HARPER of The Texas Tribune. This article originally appeared at : https://www.texastribune.org/2023/07/27/texas-property-tax-cuts-explained/