SAN ANTONIO – The City of San Antonio is expected to give homeowners another break on property taxes this year, though other property owners will not see the same relief.
The city has to lower its tax rate to stay under a state-imposed cap, but city staff members are also recommending the city max out the possible homestead exemptions at 20%. That would result in San Antonio homeowners paying less on their city tax bills than in 2022, even though their home values are likely higher.
But that exemption only applies to a person’s primary home. The owners of other properties, like apartment buildings, businesses, or second homes, will likely still pay more on the city portion of their property tax bills than last year because of rising valuations.
The city council is expected to vote on whether to raise the city’s current 10% homestead exemption during its June 22 meeting. But the tax rate won’t be set until the council passes the annual budget in September.
For now, city staff members are estimating a tax rate of 54.041 cents per $100 worth of taxable value to be paired with the 20% homestead exemption. The 2022 tax rate was 54.161 cents per $100 worth of taxable value.
Council members appeared largely receptive to maxing out the homestead exemption during a briefing Wednesday afternoon. Though, outgoing Councilman Mario Bravo noted that if the city weren’t maxing out homestead exemptions, it could cut the tax rate even further, affecting all properties, not just homeowners.
“The more we help homeowners, the more we -- that means we’re having to shift that tax burden to somebody, and that’s working-class families, that’s renters. And so it’s just something to be mindful of,” Bravo said.
WHY IS THE CITY DOING THIS?
The proposed homestead exemption increase and tax rate cut aren’t gifts so much as they are a necessity because of skyrocketing property values.
The city’s property tax rate is broken into two portions: its maintenance and operations rate and its debt service rate. Because of a state-imposed cap, the city can only collect up to 3.5% more revenue from the M&O rate compared to the previous year.
If the city were to set a tax rate that would bring in more money above that cap, it would have to hold an election on that tax rate.
Because valuations are going up so much, the city would easily exceed the cap if it were to keep the tax rate and exemptions where they are. So it needs to do something to cut revenue.
Property value protests are still ongoing, but the city estimates the total taxable value of San Antonio is up 12.2% compared to last year. Single-family homes are up 10.7%. Multi-family residential properties are up 16.8%, and the value of commercial properties is up 12.2%.
There is one limited way cities can skirt the 3.5% cap without triggering an election, which the city plans to use. In years when the city stays below the cap, it can “bank” the unused increment of the tax rate to use later.
City staff have included a portion of the unused increment from the 2020 property tax rate in their plans to rake in an additional $9 million above the cap.
TAX BREAK BASICS
Homestead exemptions are the main form of tax relief for most homeowners and are only awarded for someone’s primary home.
After a homeowner obtains a homestead designation, the taxable value of their property can only go up 10% or less in any one year, no matter how much higher their appraised value is.
On top of that, taxing entities like the City of San Antonio can give further tax breaks for these properties, based on a percentage of their appraised value. That discount is subtracted from the home’s assessed value, lowering how much they are actually taxed on.
The city instituted a bare minimum homestead of 0.01% or $5,000 in 2019. In 2022, the council raised it to 10% as part of a larger tax relief package.
At the same time, the city council increased additional exemptions for disabled homeowners from $12,500 to $85,000 and the exemption for seniors from $65,000 to $85,000.
Seniors also have the city’s portion of their tax bills frozen after they turn 65.