Sugar Land City Council took the first step to approve targeted tax cuts for homeowners on June 7 by voting to increase the homestead exemption from 12 to 13 percent, effective for the 2022 tax year.
The decision, based on a staff recommendation, reduces the taxable value of homesteads by 1 percent, lowering tax bills and addressing increases in property values. The city has no control over appraisals.
Since the city cannot control residential values, it must rely on tools available to manage growth in tax bills. The city’s Financial Management Policy Statements target a goal of no more than a 3 percent average annual increase in residential tax bills unless a general obligation bond election is approved by the voters.
The increased exemption represents an estimated citywide savings to residents of $400,000 or $15 per year on the average home value of $420,000. The savings are based on the city’s current tax rate of 34.65 cents. The homestead exemption increase provides tax relief to homeowners while still preserving the city’s ability to implement the remaining general obligation bond projects approved by voters in 2019 to address drainage, mobility and public safety. The financial strategy preserves the ability to respond to external challenges such as economic uncertainty, sales tax revenue volatility and the impact of state legislation that affects the city’s ability to fund services.
“Based on the 2022 preliminary tax roll, property values in our city are increasing at a rate not seen before,” said City Manager Michael W. Goodrum. “One way we can address residential value growth is through the homestead exemption, which reduces taxable value by taking a percentage off the assessed value. This ultimately reduces the tax burden for residents.”
The homestead exemption targets tax cuts directly to homeowners. Since 2007, homestead exemptions targeting tax cuts for homeowners have been raised from 1 percent to 13 percent — the equivalent of 3 cents on the city’s tax rate, which is already the second lowest in the state for similar sized cities.
City Council is scheduled to approve the exemption increase on second reading on June 21; the exemption will be reflected on tax bills distributed later this year.