The Impact of Texas’s Increased Business Personal Property Tax Exemption — Key Differences for Equipment Lessors vs. Standard Businesses

Overview of the 2026 Texas BPP Tax Change 

Effective January 1, 2026, Texas significantly increased the small business exemption for Business Personal Property (BPP) from $2,500 to $125,000 of market value. This change was designed to provide broad tax relief to businesses across the state. Unlike the previous exemption—which operated as a simple threshold that taxpayers either qualified for or did not—the new exemption applies automatically, reducing every account’s taxable value by $125,000. 

While this represents substantial tax savings, the application of the exemption varies depending on the type of taxpayer. These differences are especially important for equipment lessors, whose treatment under the law diverges from that of standard operating businesses. 

How the Exemption Applies to Standard Businesses 

For most businesses, the exemption is applied at each individual location. All taxable personal property owned by the business—or by any related party—at that specific site is aggregated. The first $125,000 of market value at each location is exempt, and only the value above that threshold is subject to taxation. 

How the Exemption Applies to Equipment Lessors 

Equipment lessors are treated differently under the new law. Instead of applying the exemption per location, the exemption applies once per taxing jurisdiction. 

For example: 

• A lessee may believe their individual piece of equipment should be fully exempt because its value is below $125,000. 

• However, if the lessor owns other equipment within the same taxing jurisdiction, the combined value may exceed the exemption. 

• As a result, the jurisdiction may still assess a tax bill, and the lessor may seek reimbursement from the lessee under the terms of the lease. 

  
  

What This Means for Your Team 

The expanded exemption offers meaningful tax relief, but the differing rules for lessors introduce new complexities. To avoid miscommunication and ensure proper reimbursement: 

• Make sure your internal teams understand how the exemption applies to leased equipment. 

• Review lease language related to tax reimbursement. 

• Communicate proactively with lessees who may be unaware of the jurisdiction‑level application for lessors. 

  
  

If you have questions about how the 2026 exemption impacts your portfolio, or if you need assistance navigating compliance requirements, our team is here to help.