Ed Neuhaus 
Governor Abbott dropped a big one in December. As part of his 2026 reelection campaign, he announced a plan to completely eliminate school property taxes for Texas homeowners through a constitutional amendment. If you own a home in Texas, your first thought was probably “great, I save money.” But the second thought, and honestly the more important one, should be: what does this do to my home’s value?
The short answer is your home is probably going to be worth more. Potentially a lot more. But like most things in real estate, the full picture is more complicated than the headline. So lets walk through it.
What Abbott Is Actually Proposing
The plan has a few moving parts, but here is what matters to you as a homeowner:
- Eliminate the school district maintenance and operations (M&O) tax on your primary residence. This is the biggest chunk of your property tax bill.
- Cap homestead appraisal increases at 3 percent per year, down from the current 10 percent cap.
- Move to appraisals every five years instead of annually.
- Require two-thirds voter approval for any future property tax increases.
Now here is the reality check. The Texas Legislature does not meet again until 2027. This is a campaign promise, not a bill sitting on someone’s desk. And the Texas Tribune reported that even Lt. Governor Dan Patrick has pushed back, saying full elimination is not realistic right now. Similar proposals have come and gone before.
But even partial progress matters. Texas has already made significant moves. The homestead exemption jumped from $100,000 to $140,000 as of January 1, 2026, saving the average homeowner about $484 a year on school taxes alone. The state spent $51 billion on tax relief in the current budget cycle. The direction is clear, even if the destination is still up for debate.
Why Eliminating Taxes Makes Your Home Worth More
This is the part most people do not think through, so lets break it down with real numbers.
When someone buys a home, they do not just look at the price tag. They look at the monthly payment. And that monthly payment includes principal, interest, taxes, and insurance. Your lender uses all four of those numbers to decide how much house you can afford.
Right now, property taxes eat up a huge portion of your monthly budget. If you own a $500,000 home in Austin, you are paying somewhere around $7,000 to $8,000 a year in total property taxes. The school M&O piece alone runs about $4,000 to $5,000 of that.
So what happens if that $4,000 to $5,000 disappears from your annual costs? Two things happen at once:
First, your carrying costs drop immediately. You are saving $350 to $450 per month. That is real money back in your pocket every single month for as long as you own the home.
Second, and this is the bigger deal, every buyer in the market suddenly has more purchasing power. That $350 to $450 a month they are no longer spending on taxes? Their lender lets them put that toward a bigger mortgage. The math works out to roughly $50,000 to $70,000 in additional buying power.
Think about what that means. If every buyer shopping in Lakeway or Cedar Park or Steiner Ranch can suddenly afford $50,000 to $70,000 more than they could last year, where do you think prices go? Up. And not by a little.
The Math on Your Home
Economic research on this exact scenario, including analysis from tax policy experts, suggests that eliminating school M&O taxes for homeowners would drive home values up by at least 7 to 9 percent almost immediately. In high-tax, high-demand markets like Austin and its surrounding communities, those numbers could be even higher.
Lets put that on a real home.
| Your Home Value | School M&O Savings (Annual) | Expected Value Increase (7-9%) | Your New Equity |
|---|---|---|---|
| $400,000 | ~$3,200 | $28,000 – $36,000 | $428,000 – $436,000 |
| $550,000 | ~$4,400 | $38,500 – $49,500 | $588,500 – $599,500 |
| $750,000 | ~$6,000 | $52,500 – $67,500 | $802,500 – $817,500 |
| $1,000,000 | ~$8,000 | $70,000 – $90,000 | $1,070,000 – $1,090,000 |
So your $550,000 home in Round Rock or Dripping Springs could see $40,000 to $50,000 in new equity practically overnight. Not from renovations. Not from market appreciation. Just from the tax burden being removed.
And here is the thing I always tell my clients. This is not some theoretical exercise. When Florida explored a similar proposal, economic modeling showed it would add $200 to $250 billion in aggregate homeowner equity statewide. Texas has even higher tax rates than Florida, so our numbers could be bigger.
The Catch Nobody is Talking About
Ok so far this sounds like a no brainer right? Save money on taxes AND your home goes up in value? Where do I sign?
But here is the part that does not make the campaign speeches.
The appreciation eats the savings. If you already own your home, you win twice: lower costs and higher equity. But if you are trying to buy a home, you are in the same boat you were before. Yes, you do not have to pay property taxes. But the home costs $50,000 more than it would have. Your monthly payment ends up about the same.
The savings get transferred from the buyer to the seller through higher prices. I have been doing this long enough to know that the market always finds a way to absorb any new purchasing power. Always.
Then there is the supply problem. Right now, property taxes actually motivate people to sell. Empty nesters paying $8,000 a year on a house that is too big for them have a real financial incentive to downsize. Take that incentive away and a lot of those people stay put. They are sitting on a home with no tax burden and growing equity. Why would they move?
California learned this the hard way with Proposition 13 back in 1978. They capped property taxes, and long-term owners had zero incentive to sell. The result was less inventory, higher prices, and younger families getting locked out of homeownership for decades. Michigan saw a similar dynamic after their 1994 tax reform.
In a market like Circle C Ranch or Rough Hollow, where inventory is already tight, this could make things even tougher for buyers.
What This Means for Austin Specifically
Austin is a unique case. Home values have actually come down a bit over the past year. The median is around $520,000 to $550,000 in the city, and the broader metro sits closer to $435,000. We have been in a correction after the 2021-2022 run up.
At the same time, property taxes here are punishing. Travis County homeowners are paying an average of $7,319 a year. And with the city council’s budget adjustments after Prop Q failed, most Austin homeowners are looking at another $680 or so increase in 2026 across city, county, and healthcare district taxes combined.
So Austin homeowners are feeling the squeeze from both sides. Home values are flat to slightly down, but the tax bills keep climbing. That is exactly why Abbott’s proposal resonates so strongly here.
If school M&O taxes were eliminated for Austin homeowners, the impact would be some of the most dramatic in the state. We are talking about $4,000 to $6,000 a year coming off the books. For a market that is already seeing renewed tech sector demand and population growth, that kind of affordability shift would likely trigger a new wave of appreciation.
And here is something I watch closely. Institutional investors already have Austin on their radar as a high-growth rental market. If tax policy changes make ownership even more attractive relative to renting, you could see investor strategies shift toward acquiring properties that benefit from homestead protections. That adds another layer of competition for buyers.
Renters Get Left Out
One thing that does not get enough attention in this conversation: the plan only covers your primary residence. If you own rental properties, vacation homes, or commercial real estate, you do not get the school tax elimination. You would get the 3 percent appraisal cap, but that is it.
About 40 percent of Texans rent. They indirectly pay property taxes through their rent, and this proposal does nothing for them. If anything, it could make things worse. If homeownership becomes relatively cheaper than renting, and landlords still carry the full tax burden, the economics of building new rental housing get harder. Less rental supply means higher rents.
And if the state replaces the lost property tax revenue with a higher sales tax? That hits renters hardest because they tend to spend a larger share of their income on taxable goods. Some analysts have suggested Texas would need a sales tax of 20 to 25 percent to fully cover the gap. That is not going to happen, but even a meaningful increase would be felt.
What Smart Homeowners Should Be Thinking About Right Now
Here is my take after watching Texas real estate for over 15 years.
If you already own a home in Texas, this is a good position to be in. Whether the full elimination happens or we get another round of compression and exemption increases, the direction is toward lower property taxes. Every step in that direction adds equity to your home.
If you are thinking about buying, do not wait for the tax cuts to buy. If and when these changes happen, prices go up. You want to be on the ownership side of that equation, not competing against buyers who suddenly have $50,000 more purchasing power than they did before.
If you own investment properties, pay attention to the details. The current proposal carves out non-homestead properties. The 3 percent appraisal cap helps, but you are not getting the same deal as owner-occupants. Factor that into your hold vs sell analysis.
If you are thinking about selling, the timing matters. A major tax reform announcement or legislative action could boost buyer enthusiasm significantly. But we are likely looking at 2027 or later before anything passes. If your timeline is flexible, staying informed on the legislative calendar is worth the effort.
Bottom line: property tax policy is one of the single biggest drivers of real estate values. What is happening in Texas right now, even at the campaign promise stage, is something every homeowner should understand. The math is not complicated. Lower taxes equals higher values. The question is just how much and how fast.
Have questions about how this affects your specific situation? Reach out to Ed Neuhaus for a personalized look at your home’s position in this market. Whether you are thinking about buying, selling, or just understanding what your home is worth today, I have been helping families navigate the Austin and Hill Country markets since 2009.
