As 2025 comes to an end, both state lawmakers and federal tax officials are preparing changes that could significantly impact how Americans pay and save. Property tax relief has become a political priority in several Republican-led states, while federal tax law, revised under the One Big Beautiful Bill Act (OBBBA), introduces new deductions and caps that will take effect in 2026.
These measures reflect an ongoing struggle to balance rising housing costs, inflation, and revenue needs. Whether through complete elimination or targeted exemptions, property tax reform remains contentious and complex. Meanwhile, new federal rules on deductions for overtime, vehicle loans, and senior taxpayers could add layers to the tax filing process next year.
States Push Forward With Local Property Tax Reform
Across the U.S., lawmakers are pursuing major property tax changes, including total elimination in some cases. According to the Tax Foundation, many of these proposals are advancing quickly despite concerns from policy experts about long-term fiscal stability.
In Florida, multiple bills introduced in 2025 aimed to either reduce or completely abolish non-school property taxes. Although the legislature has yet to choose a path forward, Governor Ron DeSantis has publicly supported full elimination. Still, a survey showed most Floridians oppose such drastic action. According to Manish Bhatt from the Center for State Tax Policy, Florida would need to replace lost property tax revenue with increased sales or income taxes, though the state currently lacks an income tax system.
In Illinois, Senate Bill 1862 granted homeowners who’ve lived in their primary residence for 30 years a property tax exemption. But according to Kamolika Das, local policy director at the Institute on Taxation and Economic Policy (ITEP), the measure is “poorly targeted” and “inequitable,” favoring long-term property owners over younger, first-time buyers. Das added that it could significantly undermine the local tax base and reduce funding for essential services.
Meanwhile, Ohio sent five property tax reform bills to Governor Mike DeWine, giving county officials greater control over local levies and tying tax growth to inflation. A separate grassroots campaign is also underway to eliminate property taxes entirely. However, Das noted that Republican leaders in the state have not supported the idea, warning that without property taxes, “massive cuts to education or local services” would be unavoidable.
In Pennsylvania, a bill to eliminate school property taxes by 2029 would shift the financial burden to income and sales taxes. Das, who resides in the state, dismissed the proposal as political theater, noting it has received little public support. School property taxes generate between $15 and $17 billion annually in Pennsylvania.
Balancing Tax Cuts With Public Funding Obligations
Although property tax relief may offer immediate support to homeowners facing rising housing costs, economists and policy analysts warn that eliminating such a stable revenue source could jeopardize essential public services. According to ITEP, replacing property tax income typically requires increasing other taxes, such as sales or income taxes, which often disproportionately impact lower- and middle-income households.
In states like Florida and Texas, where no personal income tax exists, eliminating property taxes could force a heavy reliance on sales tax, a shift that Kamolika Das describes as “extremely regressive.” She argues that the current reforms “already harm people at the bottom the most,” particularly renters, low-income families, and younger residents who do not benefit from most property-based exemptions.
Experts also point out that long-term exemptions, such as Illinois’ 30-year homestead provision, risk eroding the local tax base over time while offering little help to those newly entering the housing market. In places like Pennsylvania, where school property taxes are a major source of education funding, elimination without a viable replacement could drastically affect public schools.
According to the Tax Foundation, lawmakers should ensure that reform efforts remain transparent, economically sound, and equitable. The challenge heading into 2026 will be finding solutions that balance affordability for taxpayers without compromising the public services those same taxes support.
