Owning a home comes with all kinds of expenses, and often the largest are annual property taxes. Are you stuck paying what the bill says, or is there something you can do to get your property taxes lowered in Texas? Texas has one of the nation’s highest average property tax rates.
Every year, Texas counties collect an average of 1.60% of a property’s assessed fair market value in property taxes. So if you are wondering how to get property taxes lowered in Texas and how this will impact your overall payment, we have you covered. Keep reading to learn more about how property taxes are calculated and where you can intervene to lower your tax bill.
Before Learning How to Get Property Taxes Lowered in Texas, You Need to Understand Property Taxes
First, to get property taxes lowered in Texas, you’ll need to understand what they are. For starters, property taxes fund local services. This money is usually spent on police and fire departments, schools, libraries, roads, and hospitals.
Understanding property taxes can be difficult, especially if there is a discrepancy between how neighboring towns calculate their taxes. This is especially true in Texas, as it does not have a state property tax, and the Comptroller’s office is not responsible for determining tax rates or collecting taxes.
However, each municipality has its taxing unit. This unit establishes property tax rates for different levies, such as school district taxes, city or county taxes, and junior college taxes.
There are two primary stages in how property taxes are calculated:
- Your area’s County Appraisal District (CAD) calculates each taxable property’s value. Every property is assessed at least once every three years, and CAD officials use algorithms and market data to adjust the property’s estimated value annually between in-person assessments. If you own a property and the value increases, you’ll receive a Notice of Appraised Value in the spring.
- The county tax office uses the new property value (which is finalized in an appraisal district roll each summer) to calculate each property’s tax bill. They do this by weighing the total value of the taxable properties against the approved budget for the area and then determining the tax rate and individual tax bills.
Knowing the overview of these steps is essential because they represent two opportunities homeowners have to reduce their property tax bills. First, property owners can protest their taxes—specifically, their property’s assessed value—through a formal protest process managed by the local CAD.
Homeowners can also apply for exemptions that remove part of that assessment value from some tax levies. These options will be discussed in more detail later in this guide.
How Property Value Assessment Works
Every year, the appraisal district in each county appraises properties and determines their market value. Texas counties’ property tax rates are calculated using the total property value and the revenue requirement.
Keep in mind that property tax appraisals are organized, and the appraiser may use any or all of the methods listed below:
- The sales evaluation method is the approach of analyzing a property by comparing sales in the region. It’s done by considering the property’s condition, location, and improvements.
- The equity method determines the property’s value by calculating how much it would cost to replace it.
In the case of renting, the income method is used to estimate the value of the property based on the potential income. It should be noted that this method is only available for properties with four or more units. Qualifying agricultural homesteads are also measured differently through a mechanism called productivity value. This process assesses an eligible agricultural homestead based on the value of the goods it can produce, which is often substantially lower than conventional market value.
While county assessment officials do their best to ensure this process is accurate, the valuation you receive may be inaccurate or not fully account for the unique features of your property. Some of the ways a property assessment can be incorrect include the following:
- Some features that impact your property’s market value may not be considered. This can include being near eyesores or unappealing features (graveyards, large power lines, wastewater treatment facilities, etc.) or having easements along your property line.
- Your property valuation was calculated with other homes in mind. County officials can gauge the market value of your home by comparing it to comparable properties in your neighborhood. If these properties were updated recently, sold on the market, or have high-value renovations that weigh into their valuations, these can inaccurately increase your property’s value.
- Some details may simply be wrong. Many counties increasingly rely on automated programs. This can lead to your property’s assessment being configured against properties that aren’t comparable, either by having different square footage, being built in different decades, or being in other neighborhoods while happening to share the same street name.
Suppose you believe there are inaccuracies in your property’s assessed value. In that case, you can file a protest and have your property undergo a more thorough assessment process to get your property taxes lowered in Texas.
Related: Common Myths and Misconceptions About Appraisal District Roll Values in Texas
Reduce Texas Property Taxes With a Property Tax Exemption
One of the most dependable ways to get property taxes lowered in Texas is to qualify for a property tax exemption. However, you should note that your county’s requirements will determine whether you are eligible for a specific exemption.
Common property tax exemptions in Texas are:
- General residence homestead exemption: This measure offers property tax relief for people whose residence is their primary residence. It grants a $40,000 exemption for school district tax levies. It also effectively caps property value increases at 10% each year, after the first full year of living in the property.
- Over-65 or residents with disabilities exemptions: This is often considered a supplement to the general residence homestead exemption. Senior citizens and people with disabilities can exempt an additional $10,000 of their property’s value from school district taxes.
- Property tax relief is exempted for veterans with service-related disabilities; the amount is determined by the age and degree of the condition.
- Property tax reduction for a veteran’s widow in the same amount they were liable for. This exception is available to the surviving spouse.
Protest Your Property Taxes
This is another effective strategy for how to get property taxes lowered in Texas, and protesting your taxes is your right as a homeowner. During this process, a homeowner or their appointed representative can file a Property Owner’s Notice of Protest. This document serves as notification of your protest, and filing this form by the deadline is essential.
If you decide to protest, you can go at it alone by researching, gathering data, and filing the protest. However, many homeowners are unfamiliar with the process and feel overwhelmed by negotiating with the county or representing themselves at a formal hearing before an Appraisal Review Board (ARB). Most homeowners also don’t have easy access to home repair quotes, standard CAD practices, or “comps”—information about comparable properties that are typically only available to licensed real estate agents.
Alternatively, you can hire a property tax company to do everything for you every year so you can focus on other things. If it sounds tricky and you are concerned about the paperwork involved, you can hire a tax protest company to protest on your behalf. You only need to provide basic personal and property information, and their experts will take care of everything for you, often annually, so you don’t have to remember every year.
Related: How to Present the Best Case at Your Texas Property Hearing
There are various stages throughout the protest process. Your county may offer a second valuation as a compromise between your valuation and theirs. Alternatively, the method may extend past negotiations to a full hearing. In this situation, you (or a representative) and the county appraisal present your arguments to the board. They listen to and review the evidence, then make their final decision.
If the board grants your appeal, it will only reduce your home’s assessment, not your effective tax rate. However, you will still be taxed at the same rate, and your tax bill will lessen.
Check Your Tax Protest Deadline
Homeowners who wish to protest their property taxes must file their protest form by the deadline. This deadline is May 15, or thirty days after receiving a Notice of Appraised Value. In the subsequent weeks, your CAD will provide updates and prompt you to schedule a hearing as needed.
Benefits of Protesting Your Property Taxes
Homeowners can access lots of benefits from protesting their property taxes every spring. Those benefits include:
- Potential savings on your upcoming property tax bill: If you reduce your property value by even $10,000 on the CAD records, you can see substantial savings of approximately $160.
- Downstream savings in subsequent years: If you reduce your property taxes this year by lowering your property’s assessed value, that temper potential increases in the future. Combined with the cap offered through a homestead exemption, you can see hundreds or thousands of dollars in savings over the years.
- Peace of mind: Even if your local CAD refuses to adjust your property valuation and the review board doesn’t agree to any adjustments, you have the peace of mind knowing you’re paying the fairest possible amount.
Consider Applicable Tax Write-Offs and Deductions That May Apply to You
There are three primary considerations for getting property tax reductions via deductions or tax write-offs:
1. Itemize Your Deductions
To take the property tax deduction, you must first itemize your deductions.
The total of your itemized deductions must be greater than the standard deduction for your filing status for this to be worthwhile. This includes money spent on medical expenses, charity, and mortgage interest.
Otherwise, you’ll be taxed on more income than is necessary, increasing your tax bill.
2. The Tax Cuts and Jobs Act
The TCJA restricts the amount of property taxes that you can deduct.
In 2018, they imposed a $10,000 cap on deductions for state, local, and property taxes combined. This limit applies to any state or local income and property taxes you pay.
Because of this, you can no longer access a $12,000 reduction if you spend $6,000 on state income taxes (which are not applicable in Texas) and $6,000 on property taxes. You can deduct up to $10,000 in these expenses, but the law effectively forces you to leave $2,000 on the table.
3. Escrow Payment for Property Taxes
You can deduct property taxes purchased directly from the taxing authority and those paid into an escrow account as part of your mortgage payments. In the latter case, your mortgage lender pays the taxing power on your behalf.
Even if you pay more into escrow for the year, you can only deduct the amount your lender pays for property taxes (the tax assessment).
Get Property Taxes Lowered In Texas – Key Takeaways
Balancing between the desire for a beautiful home and the need to pay as little tax as possible is often challenging. However, once you understand how to lower your property taxes, the requirements needed, and your right to protest, you are on your way there. Your tax bill is not set in stone; therefore, a little homework will lighten the load.If you want property taxes lowered in Texas, please do not hesitate to sign up and see how our team can reduce your property valuation and property taxes. At Home Tax Shield, we realize that navigating the appeals process can be challenging and time-consuming and that not everyone is familiar with all the practices that govern it. Luckily, as real estate and property tax experts, we will do the heavy lifting for you.