McLennan County homeowners can expect to see hundreds of dollars in tax cuts

The Texas Legislature this year passed measures that shifted some of the school funding burden from local to state government and raised the homeowner exemptions to $100,000 for school taxes, pending voter approval in November.

School taxes make up the largest part of the overall tax bill for McLennan County homeowners, who also pay taxes to the county, McLennan Community College and, if they live in incorporated areas, city taxes.

McLennan Central Appraisal District Chief Appraiser Joe Don Bobbitt said many homeowners will see the tax cut, though anomalies exist where new construction would not be eligible for exemptions. Even homeowners moving in after Jan. 1 will be allowed a prorated homestead exemption based on their move-in date, due to 2021 legislation known as Senate Bill 8.

A large piece of the tax rate decrease is due to state-mandated “compression” of school tax rates, which limits the rates schools can set for maintenance and operations, while supplementing the lost local taxpayer revenue with state funding.

Midway ISD board President Pete Rusek told the Tribune-Herald in August that under Texas’ formula for school funding, state funding generally decreases as local revenues go up. As property values within a district rise, local tax revenue to the district increases, decreasing the state’s funding and leaving local taxpayers to foot a larger proportion of the school funding burden.

The point of tax rate compression is to even out state and local shares, relieving local taxpayers of the school district’s tax burden, Rusek said.

At the same time, homestead exemptions will rise from $40,000 to $100,000, shrinking the home’s taxable value. The measure has to be approved by Texas voters in a constitutional amendment election Nov. 7, but school districts have already incorporated the exemption into their budget projections.

Bobbitt said he can’t imagine that the exemption’s election would fail, but if it does the tax office would have to send out a supplemental tax bill to make up the difference as districts were advised to budget with the $100,000  exemption in mind.

An $18 billion tax relief package signed by Gov. Greg Abbott in July includes some $7.1 billion for the rate compression and $5.6 billion to increase homestead exemptions.

An analysis of recently passed tax rates and taxable value estimates indicates that a McLennan County homeowner could see a savings of $500 or more on school taxes in the coming year. 

Bobbitt said said the way exemptions work is twofold: first, a home’s appraised property value may only go up by 10% over last year’s value, capping the home’s taxable value far below its market value. Then, a homestead exemption reduces the value to be taxed by the amount specified, in this case $100,000.

For example, a home that was valued at $200,000 in 2022 may only increase by 10% in 2023 to $220,000. Then, the $100,000 homestead exemption reduces the home’s taxable value to $120,000, which is the value that would be applied to the school tax rate.

School districts in McLennan County each decreased their tax rates by 15 cents per $100 valuation or more, Waco ISD leading with a 21-cent decrease. A person with a home at the district’s average taxable value of $96,185, including the homestead exemption, would see a tax cut of about $654 from last year for a total of some $989 paid to the school district.

Midway ISD decreased its tax rate by 18.5 cents, reducing the average taxpayer’s bill by about $738 this year for a total of $2,323. The average resident within China Spring ISD can expect a decrease of about $714, those within Robinson ISD a decrease of about $691.73 and a decrease of about $500.63 for those within La Vega ISD.

Bobbitt said commercial properties would only benefit from the compressed rates, through many would likely break even on the tax cut due to rising property values.

The $100,000 exemption does not apply for city, college and county taxes, but those entities may elect their own exemptions. McLennan County, which decreased its rate by 4 cents, and McLennan Community College each have a 20% exemption.

The city of Woodway considered a general exemption this year that never came to fruition, but it decreased its tax rate by 4 cents. While the average taxable home value in Woodway increased from $345,073 to $380,351, or 10.2%, the average homeowner would see a decrease of about $18 in city taxes, for a total of $1,421.  

In Hewitt, the average taxable home value increased by 12.4% to $215,268, and the city hiked its tax rate by two-thirds of a cent per $100 value. The result is an average city tax increase of $143, for a tax bill of $1,177.

The city of Waco lowered its tax rate by half a cent, but due to increasing property values the average homeowner will see an increase of $160 to their yearly bill, for a total of $1,557.

Waco’s District 4 Council Member Darius Ewing agreed to serve as a case study for this story to show how shifting exemptions and rates will affect taxpayers. Ewing lives with his wife, Hannah, in a house they bought recently in the Dean Highland neighborhood.

The couple will pay $2,826 in total taxes this year on their one-story, 1,370-square-foot home, according to the appraisal district’s Truth in Taxation tool.

Ewing said he protested his appraised value this year and won a value decrease, “but they’re still up substantially from 2020 when we purchased the home.

“I’d say it’s really my fault for not protesting last year and so I was negotiating down from a much higher starting point,” he said.

The appraised value of Ewing’s home maxed out its 10% homestead cap from its 2022 value, increasing from $173,800 to $191,180. This leaves $19,750 in homestead cap loss from the house’s market value of $210,750.

According to Truth in Taxation, Ewing will pay:

• $191.52 to MCC, an increase of about $10 from 2022
• $491.51 to the county, about the same as last year
• $937.87 to Waco ISD, a savings of $723.75 from 2022, and
• $1,204.73 to the city of Waco, an increase of $129.47.

All together, Ewing will save about $584.96 this year in taxes, and said he’s looking forward to the school tax decrease.

Anyone who wants to calculate their own tax savings and see their overall tax bill can visit mclennan.countytaxrates.com and search by address or homeowner.