It's Official: Texas House Bill No. 9 Has Passed!
This is a major win for Texas businesses, paving the way for meaningful tax relief and freeing up more capital for growth and job creation.
It may come as a surprise to learn that small businesses make up 99.8% of all businesses in Texas. In December 2024, Governor Greg Abbott launched the Small Business Freedom Council to focus on cutting red tape, improving efficiency and making Texas an even stronger environment for business success.
Since the creation of the Council, one message has come through loud and clear: Property Taxes are a major burden and it’s time for reform. As a result, a legislative recommendation was released to the public in March 2025, citing a substantial increase in the Business Personal Property exemption was necessary to provide relief to small businesses. As a result of the November 4th Constitutional Amendment Election, the exemption amount was increased from $2,500 to $125,000; a change estimated to save qualifying businesses roughly $3,000 in taxes annually. This means that any business owning inventory, equipment, vehicles or any other income-producing property used in the course of business can qualify for savings beginning January 1, 2026.
Previously, the $2,500 exemption only applied to small businesses that fell at or below this threshold. House Bill No. 9 states the exemption is “up to $125,000 of the market value”. This implies that even businesses with more than $125,000 in value are eligible to receive the exemption and the remaining value would be considered taxable.
Importantly, the exemption applies to each separate location in a taxing unit (e.g., a city, county, school district, community college district, MUD, etc.).
- In Scenario A: A business with five locations in five different cities/counties/school districts will receive a $125,000 exemption for each taxing unit.
- In Scenario B: A business with five locations all within the same taxing unit will receive a single $125,000 exemption applied across that jurisdiction.
Property Taxes in Texas fund essential local services such as counties, cities, schools, and hospital districts. This reform raises important questions about potential impacts on local budgets.
According to the Texas Comptroller’s preliminary fiscal note, this measure could result in an estimated $1.6 billion-$2.1 billion revenue loss annually once fully implemented, with school districts facing up to ~$1 billion losses. For now, the state’s general revenue fund will reimburse school districts so their per-student funding level stays flat. However, the remaining taxing units such as counties, cities, and hospital districts may need to absorb or reallocate funds unless aid is introduced.
This will likely spark additional discussions about how to balance the budgets going forward, whether that’s increasing sales tax, cutting discretionary spending or delaying certain projects, while the state assesses the full impact of this reform.
Overall, House Bill No. 9 marks a significant step forward in supporting the small businesses that are the backbone of the Texas economy. Easing tax burdens for these taxpayers encourages investment and validates our state’s reputation as one of the best places to start and grow a business.
As implementation begins, our team at Modern Tax will continue to monitor updates and provide guidance to help Texas businesses make the most of these historic changes. Our knowledgeable team is here to help you navigate filings, understand your eligibility and ensure your business takes full advantage of these new exemptions.