Texas Raises Its Business Personal Property Exemption to $125,000

• HB 9 implements Proposition 9, which Texas voters approved on 4 November 2025. It applies to tax years beginning on or after 1 January 2026.

• The exemption is $125,000 of market value in income-producing tangible personal property, replacing the old exemption for property worth less than $2,500.

• It applies per location within each taxing unit, with special rules for leased-out property and property held at sites the owner neither owns nor leases.

• It is automatic. Tax Code § 11.43(a) removes any application requirement, and appraisal districts may not demand one.

• Rendition rules still apply. Businesses above $125,000 at a location must render all their property in the district. Those below it must certify that belief if they choose not to render, by 15 April.

• The cost to the state's school finance system is estimated at $193.5 million in fiscal 2027. Cities, counties and special districts face a $442.0 million reduction in levies if they keep rates unchanged.

The exemption was built in two parts during the Legislature's 2025 regular session. HJR 1 proposed a constitutional amendment allowing the Legislature to exempt part of the market value of income-producing tangible personal property. HB 9, carried by Representative Morgan Meyer, was the implementing statute, and it took effect only if voters approved the amendment.

Voters did so on 4 November 2025, when the amendment appeared as Proposition 9 among 17 constitutional measures on the ballot. HB 9 applies to tax years beginning on or after 1 January 2026. The 2026 tax bills are therefore the first to reflect it.

The change is a step change rather than an adjustment. The previous rule exempted only property with a taxable value below $2,500, a figure pegged to the minimum cost of administering the tax. HB 9 repealed that threshold and replaced it with a $125,000 exemption.

What it covers. The exemption applies to tangible personal property a business owns and holds or uses to produce income: inventory, equipment, machinery, furniture, supplies and vehicles. It applies across every taxing unit, including school districts, cities, counties and special districts.

Per location, not per business. The $125,000 applies separately at each location where property is held or used within a taxing unit. A business with five stores in one county can therefore claim five exemptions. Property at a single location cannot be split up to claim more than one. HB 9 sets separate rules for three situations:

HB 9 also defines "related business entity" and "unified business enterprise" and lets the chief appraiser investigate affiliated entities. That limits the scope for splitting operations among related companies to multiply exemptions.

No application. Tax Code § 11.43(a) excludes the new § 11.145 exemption from the general application requirement. No form is filed, and an appraisal district may not make the exemption conditional on one.

Rendition still matters. Rendition is a separate duty under Tax Code § 22.01(j-1):

• A business must render only if it believes the aggregate market value of its property at a location exceeds $125,000. If it does, it must render all its income-producing property in that appraisal district.

• A business below the threshold that chooses not to render must still file a rendition statement or property report certifying its reasonable belief that the value does not exceed the exemption.

• A chief appraiser may still require a full rendition.

• The deadline is 15 April, extendable to 15 May on written request.

The rules are uniform statewide; only forms and filing mechanics differ between appraisal districts.

Two outcomes for businesses. For small businesses whose equipment and inventory at each location stay under $125,000, the tax on business personal property effectively disappears. Home-based businesses, professional practices, small retailers and start-ups are the clearest beneficiaries. Larger businesses still pay, but on value above $125,000 at each location. Under the old rule, a business with $2 million of property received no exemption at all. It now takes $125,000 off each location's value.

The fiscal cost. The Legislative Budget Board's fiscal note estimates the cost in two layers. School district losses are partly absorbed by the state through the Foundation School Program:

For cities, counties and special districts, local levies would fall by $442.0 million in fiscal year 2027 if they kept rates unchanged. The lower taxable base raises their no-new-revenue and voter-approval rates, however. Where local governments adopt those higher rates, part of the loss shifts to owners of property that remains taxable.

The debate. Supporters, including the Texas Association of Business and the Tax Foundation, framed the change as relief for Main Street and a large cut in compliance burden. Critics, among them the Austin Chronicle editorial board, warned that it would shift the tax burden to other property owners.

Check the 2026 bill. Businesses should confirm that the exemption has been applied to each location on their 2026 appraisal notices and tax bills. Because no application is required, an omission is an appraisal error to raise with the district, not a missed filing.

Track assets by address. The exemption follows location, so fixed-asset registers should record where each item is held or used. That record supports the per-location claim and the threshold judgment behind any decision not to render.

Do not skip the 2027 filing. Businesses under $125,000 at a location still owe a certification if they choose not to render. Those above it must render all their income-producing property in the appraisal district. Calendar 15 April 2027, and 15 May if an extension is requested in writing.

Watch affiliated structures. Groups operating through several related entities should expect appraisal districts to test whether they form a unified business enterprise. Reorganizing mainly to multiply exemptions carries real challenge risk.

Advisers to local governments. Taxing units setting future rates should model the smaller business personal property base. The choice between holding rates and adopting the higher no-new-revenue rate determines who ultimately bears the cost.