Texas Property Tax Relief in 2026: What Austin Homebuyers Need to Know Right Now

If you are buying a home in Austin this year, there is a piece of Texas law that could save you hundreds of dollars annually on your property tax bill. The 89th Texas Legislature passed some of the most significant property tax relief measures the state has seen in years, and the changes are in effect for 2026.

For buyers who are evaluating affordability and monthly costs, understanding these changes matters. Property taxes are a real part of your housing payment, and in Travis County, they are not small. Here is what changed, who benefits, and what you should know before you close on a Texas home.

What Changed: The Big Picture

Texas does not have a state income tax, so property taxes are the primary way local governments and school districts fund services. That has historically made Texas property taxes among the highest in the country relative to home values.

The 89th Legislature took aim at that burden with three major pieces of relief:

• Senate Bill 4: Raised the homestead exemption from $100,000 to $140,000
• Senate Bill 23: Added an extra $60,000 exemption for homeowners 65 and older or those with qualifying disabilities, bringing the total exemption to $200,000
• House Bill 8: Compressed school district tax rates by $0.0331 per $100 of assessed value

Combined with the existing 10% annual appraisal cap on homestead properties, these changes represent meaningful, lasting relief for Texas homeowners.

How the Homestead Exemption Increase Affects Austin Buyers

The homestead exemption reduces the taxable value of your primary residence for school district taxes. With the new $140,000 exemption, a home appraised at $500,000 would be taxed as if it were worth $360,000 for the school district portion of your bill.

In Travis County, where school district tax rates have historically been in the range of $0.90 to $1.10 per $100 of value, that $40,000 increase in the exemption (from $100,000 to $140,000) can translate to approximately $360 to $440 in annual savings. Across the life of a loan, that adds up in a meaningful way.

For buyers who are on the edge of affordability or comparing Austin neighborhoods by total monthly cost, this shift in the property tax equation is worth factoring into your decision.

Who Benefits Most

Every homeowner with a homestead exemption benefits from the increase in Senate Bill 4. But a few groups benefit even more significantly:

Seniors and Disabled Homeowners

If you are 65 or older or have a qualifying disability, you now receive an additional $60,000 exemption on top of the standard $140,000. That brings your total school district exemption to $200,000. Seniors also benefit from a tax ceiling, which locks in the amount of school taxes you pay once you qualify and file the over-65 exemption.

First-Time Buyers Purchasing a Primary Residence

If you are buying your first home and it will be your primary residence, you are eligible for the homestead exemption. The key is filing on time. In Texas, you have until April 30 of the tax year to apply for exemptions you want to take effect for that year.

If you are closing in the spring of 2026, act quickly. You may still have time to file for this tax year. Talk to us and we can point you in the right direction.

Buyers Who Have Been Renting

Renters do not benefit from homestead exemptions. If you have been comparing the cost of renting versus buying, the updated exemption structure makes owning even more attractive from a total cost perspective. Property tax relief exists for owners, not renters. That is one more reason the math on buying a primary residence in Austin deserves a serious look right now.

The 10% Appraisal Cap: Still One of Your Best Protections

Texas limits how much a homestead property’s assessed value can increase in a single year to 10%, regardless of what the market does. This protection kicks in automatically once your homestead exemption is on file.

In markets like Austin, where property values surged dramatically between 2020 and 2023, this cap has been enormously valuable to long-term homeowners. For new buyers, the cap starts applying after your first full year of ownership.

Important: the 10% cap applies to your assessed value for tax purposes. It does not cap what the market thinks your home is worth, and it does not restrict you from selling at market value.

School Tax Rate Compression: How It Works

House Bill 8 directed the state to reduce local school district tax rates by $0.0331 per $100 of assessed value. This applies to all properties in school districts, not just homestead properties.

On a $450,000 home, that compression alone translates to roughly $149 in annual savings from the rate reduction. Combined with the higher exemption, the cumulative savings for a primary residence buyer in 2026 can be significant when viewed over time.

This kind of rate compression works because the state supplements local school funding to offset the revenue loss from the lower rates. It does not require action on your part. It is applied automatically.

What This Means for Affordability in Austin

Property taxes are included in your monthly mortgage payment through your escrow account. When you get a mortgage, your lender estimates your annual property taxes and divides that amount by 12, adding it to your monthly payment alongside principal, interest, and insurance.

Lower property taxes mean lower escrow amounts, which means a lower total monthly payment. For buyers working within a specific monthly budget, this matters for what price range they can realistically shop in.

If you want to understand exactly how property taxes factor into your monthly payment for a specific home in Austin, get a quote from us and we will walk through the full picture with you. We look at all the numbers, not just the interest rate.

Do Not Forget the Deadline: April 30

Texas exemptions do not apply automatically to new purchases. You must file with your county appraisal district. For Travis County, that means filing with the Travis Central Appraisal District (TCAD).

The deadline to file for most exemptions is April 30 of the tax year. If you close on a home in March or April of 2026, you may still be able to capture the benefit this year. If you miss the deadline, you can file for the following year.

Explore our loan options and Second Look program if you are still in the comparison shopping phase. Once you are ready to move forward, reach out to schedule a conversation and we will help you plan your purchase around the full cost picture.

Frequently Asked Questions

Do I have to file for the homestead exemption every year?

No. Once you file and the exemption is approved, it carries over automatically each year as long as you continue to own and occupy the property as your primary residence. You only need to refile if your circumstances change.

Can I claim a homestead exemption on a second home or investment property?

No. The homestead exemption is reserved for your primary residence. Investment properties and second homes are not eligible. However, non-homestead properties valued at $5 million or less currently benefit from a temporary 20% appraisal cap.

If I close in May 2026, can I still get the exemption for this year?

The standard filing deadline is April 30. If you close after that date, you would apply for the following tax year. That said, there are circumstances where late filing is accepted. Check with TCAD directly or ask your real estate attorney for guidance on your specific situation.

How do I know what my property taxes will actually be?

Your lender will estimate your annual property tax bill based on the current assessed value and local tax rates during the loan application process. This estimate goes into your escrow calculation. Keep in mind that your assessed value may change after you purchase. We can walk you through a realistic estimate during our pre-approval conversation.

Does the homestead exemption affect my mortgage payment?

Yes, indirectly. If your property tax bill is lower because of exemptions, your monthly escrow payment will be lower as well. This reduces your total monthly housing cost. It is one of several reasons owning a primary residence in Texas can make strong financial sense over time.

The Bottom Line for Austin Homebuyers

The 2026 Texas property tax changes are real, meaningful, and working in your favor if you are buying a primary residence in Austin. The $140,000 homestead exemption, the senior bonus for qualifying homeowners, and the school tax rate compression from the 89th Legislature combine to reduce the long-term cost of homeownership in Texas.

If you are comparing renting versus buying, or evaluating whether now is the right time, property tax relief is one more reason to run the numbers carefully. We are here to help you do exactly that.

Request a quote or contact us today to talk through your home purchase plan with an experienced Texas mortgage professional.

Ferrando Financial LLC | NMLS# 2403080 | Licensed in Texas | This content is for informational purposes only and does not constitute tax or legal advice. Consult a qualified tax professional regarding your specific situation. Not a commitment to lend.