How Do Property Taxes Work in Texas?

Property Taxes 101

The tax-friendly state of Texas ranks 46th amongst all the states for overall state and local tax burden.  According to the tax foundation, the state tax for Texas is about 7.6%, which is quite a bit lower than in a state like New York, which ranked 1st with 12.7% in 2021. But how do property taxes work in Texas? In fact, Texas ranks much higher when it comes to property taxes, with only thirteen states imposing a higher rate.

That said, the value of property in Texas often gets relatively higher after appraisals, and this value is what determines the amount of property tax that will be owed on a property. If you own property, you need to gather the maximum knowledge possible about the property tax process. According to the National Taxpayers Union Foundation, about 30% to 60% of properties are over-assessed.

Unfortunately, this results in property owners paying more taxes than necessary. If you want to ensure that you do not pay more taxes than what is fair, you must know two things. Firstly, how do property taxes work in Texas? And second, how can you optimize the tax payments on your property?

From the process of Texas property taxes, to learning about tax-lowering strategies and hiring a property tax consultant, here’s a quick guide to property taxes in Texas.

How Do Property Taxes Work in Texas?

Texas is one of the states that does not impose income tax on its residents; however, it derives the funding for the state through property taxes.

The state of Texas uses this property tax for various services, as well as for public construction projects. For example, these taxes allow the state to conduct the expansion of roads and schools, as well as  carry out the construction of public projects and infrastructure.

In addition, many ongoing services that have to pay public employees also make use of property tax revenue.

Since the state’s founding, Texas has had a real estate tax. However, the imposition and governing of the tax changes over time. The local authorities, such as the county, currently collect the tax from citizens. 

Determining Property Taxes in Texas

The provisions in the Texas Constitution and Tax Code determine the property tax in Texas. For individual properties, the market value of your property helps determine the tax amount. The local Central Appraisal District (CAD) determines the value based on the 1st of January of the current year.

This value is reevaluated at least once every three years. The CAD also views the exemption applications and maintains property ownership and appraisal records.

In case of property ownership disputes or other matters, a neutral third party consisting of local members works to settle the disagreement between the property owner and the appraisal district.

What Are Texas Property Taxes Based On?

The current assessed market value of a property determines the property tax in Texas. The county district performs the real estate appraisal by comparing your property to other properties in the area. For example, comparing your home to other sold homes in the area helps determine a set value.

The determined value by local officials and tax authorities is multiplied by the tax rate to calculate the tax bill. Thus, the local tax rate is set by the local counties in Texas.

The set tax rate for every taxing entity is primarily based on the district revenue and the yearly budget. This way, the tax authorities can calculate the property tax based on the established value of the property.

If you own timberland or agricultural property, you can apply for a special appraisal based on the earnings that come from the livestock, timber, and crops produced by your land. “The land’s ability to produce agricultural or timber products determines the productivity value, which is usually lower than market value.”

How Is Texas Property Tax Calculated?

First, state legislation sets a regularity by which the local taxation authority resets the determined value of your property.

As we discussed earlier, the property tax is evaluated by multiplying an assessed value by the set local tax rate. The frequency of the tax payment is yearly or paid every five years; however, some municipalities choose a tax rate known as a millage, or mill rate.

Assessing the Value of Property

Property taxes are not generated randomly, neither are they based on a scale. Your residential and commercial property’s worth determines how the property tax in Texas works.

The assessment of your property determines the yearly or five-yearly tax.

Besides comparing the cost of the property, another way to know how the property tax is calculated is by assessing the value of the house if it were built from the ground up.

The accessor accounts for the depreciation of your home and then decides the worth of your land. For commercial properties, the value is based on the property or business’s income.

How Can Texas Residents Lower Property Taxes?

Property taxes in Texas can be lowered under certain circumstances. Depending on your living situation, property, and other conditions, you can leverage legal options to reduce property tax in Texas. So if you’re thinking “thanks for the background knowledge, but I’m still wondering how property taxes work in Texas,” here comes the good part.

Request a Copy of Your Rate Card

The county appraisal district is responsible for maintaining a profile of your property. This profile has all the information about commercial and residential properties and their appraised value, along with the year the property was built, the measurements, and the number of rooms.

Your county record of the property will likely have some errors. To correct these errors, you can request the county appraisal district to issue a copy of a rate card.

Then, you can review it thoroughly to ensure that all the information is correct. Outdated records can account for changes in the state of your property. Thus, it is vital to identify the outdated information and use it to potentially lower your property taxes.

H3: Check the Structures on Your Property

Every structure on your land is assessed for real estate taxes. So if you’re concerned about how property taxes work in Texas and why you’re paying unnecessary tax, you need to make sure that the appraiser isn’t factoring structures like sheds into the property tax.

Some counties consider permanent structures such as your house liable for property taxation while excluding smaller, additional buildings like storage sheds and greenhouses. Therefore you should check your rate card to know whether your secondary buildings are included in your tax bill.

If the local county taxes your sheds and storage structures, you can file a property tax appeal to omit them from your taxing assessment.

Get an Independent Appraisal

County assessors are responsible for property appraisals. But, sometimes, your appraisal result is different from what you expect. This is due to the difference in the approach that determines your property’s worth.

Your tax assessment may be high when the market value is higher than a tax-appraised value. If you think that the assessment is higher than your expectations, you can spend some money to get an independent appraisal.

When an independent appraisal assesses the worth of your property, and it comes out to be less than the value determined by the county assessor, you can use that to argue that the valuation should be reduced. This way, getting an independent appraisal will help save money.

Related: How to Lower Property Taxes in Texas – Home Tax Shield

Property Tax Exemptions in Texas

In Texas, partial and absolute property tax exemptions are available for property owners. Absolute or total exemption waives off a property tax by either reducing the cost or by eliminating a portion of your home from taxation. In contrast, partial property tax exemption deducts a fixed amount from the overall tax value that you have to pay to the government.

Exemptions will save you from paying higher tax amounts, but you must find out whether you’re eligible for the various exemptions and apply for them. 

After you apply for an exemption, the appraisal district reviews your application and determines whether your property is eligible. Here are some of the available exemptions that you can leverage to lower the property tax in Texas.

The Homestead Exemption

The homestead exemption is amongst the most commonly applied exemptions. But what exactly is the homestead exemption, and how does it work?

This exemption will lower the property tax by removing one portion of your home from taxation. It allows property owners to use about $25,000 as tax relief if the property is the owner’s primary residence.

The local exemption must not be less than $5,000. Counties can also offer about $3,000 exemption if it collects flood control or farm-to-market taxes.

The tax code section 1.13 (n) allows a homestead exemption equivalent to 20% of the appraised value of the property. You are eligible for the homestead exemption if you’re not taking advantage of this exemption anywhere else.

Remember that the property must be your primary residence, so you should occupy it. Your driver’s license must indicate this residency as well.

Exemptions for Seniors and the Disabled

Property owners who have a disability or are above the age of 65 can apply for an exemption that avails them of about $10,000 in addition to the homestead exemption.

Besides this, in case of a person’s death, the spouse qualifies for this exemption if his/her primary residence stays the same and he/she is above the age of 55.

Exemption for Disabled Veterans

Veterans of the United States armed forces with a disability are eligible for a generous exemption if their disability results from their service. This type of exemption equals the 100% appraised value of their primary residence.

You can also assess tax exemption on a solar-powered and wind-powered energy devices in Texas.

Related: Definitive Guide to Lower Your Property Taxes in Texas

How Can Having a Tax Professional Assist with Property Taxes Be Helpful?

A property tax consultant will help a company or an individual pay their due taxes correctly and on time. The consultant will be an expert in tax planning, tax compliance, and tax law. Such expertise can help you minimize your yearly tax obligations.

Property tax consultants or services can also protest the tax on behalf of you, the property owner, creating a streamlined and low-stress way to protest and lower your property tax. 

In addition, they can submit a tax appeal in case of unfair appraisals. Tax consultants can prepare jurisdiction filings, negotiate appeals, and compile data to help lower the property tax.

Great tax services offer experienced consultants, and they can provide property owners with expert advice to properly leverage exemptions and appraisals. As a result, they effectively reduce the tax and help property owners save a considerable amount of money.

Every Homeowner Deserves Fair Property Tax Valuation

The Texas property tax system is complex. Even minor mistakes can account for considerable payments and calculations. Home Tax Shield property tax experts can help you find various ways to reduce your tax bill. They can also examine your options for protest and appeals and file them on your behalf. 

Sign up today to let Home Tax Shield save you money by reducing your overall tax bill.

Mar 4th 2022

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