Texas property tax law changes every few years. See the latest posts for the most up-to-date information.
In many states in the U.S., counties collect property taxes to cover a variety of social systems, including public transportation, fire departments, law enforcement, education, and public spaces. These taxes provide the largest source of funding used by local governments to support community needs.
No matter the locale, property owners often feel that they’re paying too much in taxes. Oftentimes, this is because taxpayers aren’t familiar with the options and approaches available to them to lessen their tax burden. With this definitive guide to lower your property taxes in Texas, we’ll show you there are a number of ways to help you do just that.
How Are Properties Appraised?
If you’ve purchased a home using a mortgage, you’re certainly familiar with the role an appraisal plays in the homebuying process. But perhaps you’ve never thought about how your property is re-appraised each year to determine how much tax you’ll owe, or how many variables are involved.
Understanding the tax appraisal process is key to lowering your property taxes. When you understand how your property tax is calculated you’ll be better prepared to explore and leverage your options to keep your taxes low. We created this definitive guide to lower your property taxes in Texas to give you a head start over most homeowners.
Each county has its own appraisal district commonly referred to as the County Appraisal District (CAD). The district is led by a Chief Appraiser who is tasked with the annual appraisal of properties throughout the county. This is done using a mass appraisal system, in which the appraisal district collects information and classifies properties according to a variety of factors. Taken into account are things such as use, size, condition, and construction type.
The appraisal district leverages recent property sales data to assign value to properties in each class group. Because each property has unique characteristics, the county makes “adjustments” to try to ensure the sales data is applied to each property in an equal and uniform manner. By accounting for differences like age and location, the district utilizes the sales data to determine the tax appraisal value for all properties in each class group.
There are three different approaches the appraisal district will typically use to appraise property:
Sales Comparison or Market Approach
This approach assigns a value based on sales figures from similar properties. By collecting sales data from properties with similar characteristics, the number is adjusted for differences between sold properties and the ones being appraised.
Income Approach
In the income approach, income and expense data is used to make a determination of the current value. This method looks to determine what a present-day investor might pay for an anticipated future revenue stream on the property being appraised.
Cost Approach
In the cost approach, appraisers determine what it would cost to replace the building. This factors in the present state of the building and serves as an assessment of what it would cost to replace the building with one of equivalent quality. Appraisers will apply depreciation and add this figure to the land value to determine the total appraised value for the property
Related: Texas Property Tax Glossary
How to Lower Your Property Taxes
Depending on your property, living situation, and even certain life circumstances, you may be able to lower your property taxes. In our guide to lowering property taxes, we’ll cover a few approaches to leveraging the legal options available to you.
Check for Errors
County appraisal districts maintain a profile on each property. These profiles contain all of the information for residential and commercial properties that are related to the appraised value, such as the year it was built, the square footage, the number of rooms, etc. Of course, there’s a chance the county record for your property contains errors.
You can contact the county appraisal district to receive a copy of your rate card. Review it to be sure that all of the information is correct and current. Sometimes these records become outdated, not accounting for changes in the state of the property. If you identify some outdated or incorrect information, you can use it to lower your property taxes.
Check the Structures on Your Property
Any and every structure – what the county calls “improvements” to the land – on your property may be assessed for property taxes. While you may be living in the main house without giving any thought to your storage shed or greenhouse, it’s likely the appraiser is factoring them into your property taxes. Some counties and towns only tax permanent structures, while others will see these as taxable property.
Once you’ve checked your rate card, you’ll have a better idea of whether you have secondary properties being taken into account in your overall tax bill. You can file a property tax appeal to ensure that the county omits these structures from your assessment, but you’ll need to be proactive.
Apply for Property Tax Relief
There are property tax relief options available to you, though they aren’t automatically granted. There are discounts in property taxes in Texas available for veterans, seniors, and those with disabilities. In some cases, certain types of properties may also qualify for tax relief and reductions. This includes property used for agricultural purposes.
Researching property tax relief in your county can take a little time but will be worth it if you find an opportunity to reduce your property tax rates. If you believe you may be entitled to property tax relief, determine whether the option is available to you and then apply for it. You may save yourself a sizable amount of money on your overall property tax bill.
Compare Tax Cards
This one might seem a bit awkward at first, but hear us out. Talking about things like money and taxes feels like a bit of a taboo in the United States. Friends and colleagues don’t often share things like salaries, bonuses, and general details of their income unless they’re close.
For that reason, you’ve likely never considered what your neighbors are paying in property taxes each year. In fact, it’s probably never come to mind that their property taxes could serve as an indication of your own, particularly if their home is similar to yours.
Since property tax profiles are public information, you can skip the tax talk and go to public records to find these details of nearby homes to compare. Make sure you look for properties in your area with similar age, square footage, and build to yours to have the most accurate benchmark. If you find a notable discrepancy, you can present this information to the appraisal district and request a reduction.
Get an Independent Appraisal
Property appraisals are done by county assessors. Oftentimes the appraisal results are quite a bit different than you may have expected. Real estate appraisers use different measures and approaches to value properties, often leading to market values that are higher than tax-appraised values.
If you have a feeling that your property tax assessment is high, you can opt for an independent appraisal. You’ll spend a few hundred dollars on an independent appraisal, but consider it an investment. If the real estate appraiser values your home at less than the county assessor, you can use that to have your valuation reduced. This could keep thousands of dollars in your pocket, so it’s worth the try – and the price. Keep in mind that most independent appraisers serve mortgage lenders as part of a real estate transaction and use appraisal processes that result in different, and often higher, values than the county appraiser.
Property Tax Exemptions
There are a variety of both absolute and partial property tax exemptions available to property owners. Partial exemptions deduct either a fixed dollar amount or a percentage from the overall value of the property subject to taxation. Absolute (or total) exemptions waive the entire property from taxation.
Most exemptions require applications from property owners in order to be applied. This means it is advantageous to learn about available exemptions and determine whether you are eligible. Appraisal districts receive and evaluate these applications and then determine whether or not you or your property qualify.
Let’s cover some of the possible tax exemptions that you may be able to leverage in order to lower your property taxes in Texas.
The Homestead Exemption
Residential homestead exemptions remove a portion of a home’s value from taxation. By taxing a lesser value you, of course, pay less in property tax.
To qualify for this exemption, your property must be your principal residence. Secondary or vacation properties do not qualify. To qualify in the tax year in question, the home must have been your principal residence from the 1st of the calendar year. You must also be considered an individual and not a business entity or corporation.
A homestead can be a separate structure on the property being considered, including a condominium or a manufactured home, as long as the property owner is living in it. Up to 20 acres of land can qualify as a homestead following these same guidelines.
There are a number of residence homestead exemptions available.
- School taxes: Owners with a homestead exemption qualify for a $25,000 exemption from their home’s value for school taxes.
- County taxes: If your county is collecting a special tax for flood control or farm-to-market roads, your homestead exemption from this tax is $3,000.
- Over 65 and disability exemptions: If you have a homestead exemption and are over the age of 65 or with a disability, you will receive a $10,000 exemption for school taxes along with the $25,000 exemption available to all homeowners. If you qualify for both the $10,000 exemption for being 65 and older and the $10,000 exemption or disability, you cannot claim both and must choose one for a reduction in school taxes.
- Optional percentage exemptions: All taxing entities, including school, city, county, or special districts, may offer their own exemptions. These may be up to 20% of the home’s value. Regardless of the percentage, this exemption must be at a minimum of $5,000. Each entity will determine whether to offer this exemption and at what percentage and this amount is added to any other qualifying exemptions.
Related: Over 65 Exemption Explained
Veteran Exemptions
These exemptions apply to veterans who have been honorably discharged, retired, or disabled while in service and extend to spouses and children of deceased veterans. These exemptions may be partial or full and apply to the veteran’s primary residence.
Disability Exemptions
If you have a medically recognized mental or physical disability, you may qualify for exemptions to your property tax charges. By meeting the locally defined parameters for receiving disability insurance benefits and if your disability prevents you from being gainfully employed, you may receive up to a 50% reduction in the assessed value of your home. You may also be able to defer payment of current or delinquent property taxes, as long as you own and live in the property.
Timber, Wildlife, and Agriculture Exemptions
If a portion of your land is classified as preserved wildlife land, farmland, or timberland, you can receive an exemption. Eligibility requirements vary and may be based on the size of your property or take into account a minimum dollar amount for agricultural sales.
File a Protest
As a taxpayer, it is your valuable right to protest the tax appraised value the county appraiser gives you each year. If you disagree with the value set by the appraisal district or any other actions taken by the district, you can file a formal protest to have these reviewed.
If your local Appraisal Review Board (ARB) reaches a decision that you are dissatisfied with, you can continue the fight by filing an arbitration or even a lawsuit. This elevates your property tax protest to the state district court located in your county, an independent arbitrator, or to the State Office of Administrative Hearings (SOAH).
Consider a Move
All states handle property taxes differently. In Texas, there are no state property taxes, and these rates are instead determined at the local level. What that means is that your property tax rate can vary widely depending on where you choose to live.
If you have a homestead exemption, the state of Texas caps the rise in property taxes at 10% each year. But this doesn’t help new homeowners. A 10% increase in your tax bill is significant.
With so many properties to evaluate, the counties are not able to look at each individual property every year. Instead, they rely on spot-checking and reporting on average home values. This can often lead homeowners with overvalued homes and higher than necessary tax bills.
After the pandemic, many Texas homeowners are left with tax bills that feel out of sorts. These bills don’t account for economic downturns, the collapse of oil prices, or general pandemic pressures.
Pandemic or not, it’s also been reported that Texas has some of the highest property taxes in the nation. Of course, we’re not advocating you leave the state. Rather, it’s valid to consider just where in the state you’re living. Hotspots such as Austin and San Antonio are seeing a rise in property values which, in turn, leads to a rise in property taxes.
Hire the Experts
Armed with this guide, you can feel like an expert in property taxes in Texas. As we’ve covered, there are many options to potentially lower your property taxes. That said, the market research and protest processes can be time-consuming.
On average it takes 12-16 hours of time over 2-3 months to effectively protest your property taxes. There are supportive documents and findings to supply, and as with any matter of dealing with the bureaucracy of local government, it can be overwhelming.
Hiring property tax experts will ensure that you’re filling out the right applications, with the right information, and you’re doing it on time. Partnering with those who know the ins and outs of property tax laws will help ensure you’re making the most of what’s available to you.