How is Texas Property Tax Calculated?

Property Taxes 101

In Texas, many government entities play a role in determining your property tax. The government uses these taxes to operate everything from counties to school districts and police departments. But how exactly is Texas property tax calculated? What do these entities take into consideration?

Apart from knowing how taxes are calculated, taxpayers should also understand the factors involved in tax calculation, possible exemptions, and protest eligibility. By being familiar with all aspects of property taxes in Texas, you’ll be able to get a fair value for your property.

How is Texas Property Tax Calculated?

Texas does not have a state-mandated rate for property taxes. Several local governmental entities determine your tax rate through the following process.

  • Property Valuation: The appraisal district determines the market value of every property in its jurisdiction.
  • Tax Rate: It then applies the tax rate for every property, depending on its market value.  The tax levied is different for each county in Texas.
  • Tax Relief and Exemptions: If the property or the property owner is eligible for tax relief and exemptions, those are deducted from the market value, and that lower market value is what is used to calculate the taxes you owe.

Finally, the appraisal district sends the tax notice to the property owner.

Property Valuation

Every property in Texas is appraised by January 1 of the tax year. The appraising district is responsible for determining the market value of the property. The market value is the price at which the property will sell at current market conditions if:

  • It is put up for sale with a reasonable time frame in an open market
  • Both the purchaser and the seller are aware of the purposes and uses of the property
  • Both the purchaser and the seller want to maximize their gains while neither is taking advantage of the other

According to the Tax Code Section 25.18, all appraisal districts have to reappraise their properties in their region once every three years. The appraisers must be in compliance with the Uniform Standards of Professional Appraisal Practice, as all taxpayers are entitled to have the appraisal done using standard techniques and methods.

The appraisers also have to use similar methods or techniques for all similar properties. When determining the market value of a property, the appraiser has to make sure they also consider the individual characteristics of every property.

Here’s how the process goes:

  • The appraisal district makes a list of all taxable properties in the jurisdiction.
  • The list contains information about the address of the property and the name of the property owner.
  • The district classifies properties based on their construction type, use, and size when conducting mass appraisals.
  • While appraisers do not have access to sale prices, they do use the data from property sales to determine the value of properties in every category.
  • The chief appraiser then considers certain factors, such as location and age, to assess the properties in every category individually.

Approaches for Property Valuation

The appraisal district mainly uses three approaches to value the properties in the jurisdiction. These are:

  • Market Approach: The market approach refers to using the sale price of similar properties to determine the appraised value of a property. In this method, the chief appraiser compares the to-be-appraised property with similar properties that have been recently sold. Then, they use the sale prices to determine the probable value of the property to be appraised.
  • Income Approach: In this approach, the appraisal district determines the value of the property based on the expense data and income. The appraiser determines the price an investor will pay right now for the revenue stream that’s expected to be gained from the respective property in the future.
  • Cost Approach: The appraiser determines the cost of replacing a building compared to another similar building that is used for the same purpose. They apply depreciation and add the estimate to the land value.

Related: Property Tax Exemptions

Varying Tax Rates

After determining the value of the property, the appraisal district levies a tax rate for each category. For instance, here is the Total Tax Rates for a few counties in 2021:

  • 1.2% for Abbott ISD
  • 0.56% for Cibolo Canyon Special ID
  • 0.56% for Delta Lake Irrigation District
  • 0.23% for Denton County

Similarly, every county has a different average tax rate that is applied to the total value of the property. The higher your property’s value is, the more your property tax for the year will be.

Notice of Appraised Value

The appraisal district sends a Notice of Appraised Value to the property owner if the value of their property has been increased from the previous year. The chief appraiser will send two types of notices.

The first is a detailed notice that describes the following:

  • The taxing units that are allowed to tax the respective property
  • The appraised value of the property from the previous tax year
  • The appraised value for the current year
  • An explanation of the total or partial exemptions available for the property or the owner
  • Exemptions from last year

The detailed notice, which is sent out in early April, also contains information about how the property owner can protest the tax if they are not satisfied with the appraised value of their property. 

A Property Tax Process Example

Let’s explain the property tax process with an example.

Suppose you live in Travis County, where the average county tax rate is 1.8%. The appraised value of your home is $250,000. Based on the average tax percentage, your property tax for the year will be around $4,550.

Factors Affecting Property Taxes in Texas

How is Texas property tax calculated when specific factors are impacting the rate you get? Like most other states, Texas also has some elements that impact the property taxes annually.

When calculating the market value of properties, the appraisal districts often use mass appraisal. In a mass appraisal, the property is assigned a value based on the average of all similar properties in the area.

While this method is considered to be effective for some types of land, it isn’t always accurate.

Being a Texas taxpayer, you are entitled to getting a uniform appraised value of your property. This means that the determined market value of your property should be aligned with that of other similar properties in the district.

Due to the lack of specificity in mass appraisals, it’s possible that your property may be appraised at a higher value than what is actually accurate.

Exemptions

Property tax exemptions refer to the reduction of the total taxable value of a property. Many types of exemptions exist, such as those for disabled veterans. 

If you qualify for an exemption, you can recompute the market value of your property. There are several factors to be considered, including how many exemptions you qualify for and whether or not you want an exemption for part or all of your land.

For instance, suppose the value of your property is $250,000, but you have an exemption of $150,000. In this case, the property tax rate will be applied to only $100,000 of the value.

Residence Homestead Exemption

Taxpayers in Texas can also qualify for residence homestead exemptions. Even if you temporarily move away from your homestead, you can still benefit from the exemption as long as you intend to return to the property. Generally, a temporary absence means you’ll be gone for up to two years.

Property Tax Protest

If you do not agree with the appraised value of your property, you can protest the tax in the state of Texas. For that, you need to fill out the property tax protest form and submit it to the appraisal district before the deadline.

The appraisal review board is a panel of local citizens who will review your form and give you a date and time for a hearing. In this hearing, you will present evidence for why you’re protesting your property tax.

The appraisal review board will hear your arguments and also listen to the chief appraiser. They will make a decision based on the evidence provided during the hearing.

If the ARB believes that your provided evidence proves your property was appraised at a higher value than it should be, you’ll get a reduction in your Texas property tax.

Although this is a good way to save a few hundred dollars on your property tax, most people are reluctant to actually protest their tax due to the effort and steps involved. An alternative to going through this process on your own is employing a company that specializes in property tax protests to engage in this process for you.

A Texas property tax protest service can ensure that the necessary steps for a successful protest are complete and correct, and that you’re getting a tax reduction without going through the process on your own.

Related: Texas Property Tax Protest Steps

How Can A Professional Service Lower Your Texas Property Taxes?

Now you know how Texas property tax is calculated. But how can you keep it as low as possible? The only possible way to do that is by protesting, every year, the appraised value of your property if you’re not satisfied with it.

That said, research has found that many people are also hesitant to protest their property taxes because of the “hassle cost.” Different from the basic hesitancy due to unknowns of the steps involved, this is the cost of the amount of time and expense you will spend on finding the information, commuting to different offices, and preparing for the hearing.

According to the Berkeley research above, the average hassle cost in Texas is around $226. Meanwhile, the average savings on tax property protests are around $300. As evident, it’s likely that you may end up spending more on hassle cost than the actual benefit you get from protesting your tax.

An alternative to protesting property tax yourself is to hire a professional tax service. Here are some ways in which a pro can help you maximize savings and lower hassle costs.

Preparing Your Protest

When the ARB sends you a notice for the hearing, you have to prepare the evidence that you’ll present during the proceedings. You can’t rely on emotional wording or wishful thinking in front of the ARB.

Rather, you need to show them newspaper reports, engineering reports, blueprints or architectural drawings, comparable properties appropriately adjusted, and other types of evidence to prove that you have a valid reason for protesting your tax.

If you don’t have sufficient evidence, the ARB will rule against you. A professional service does the work to gather enough evidence to argue your case in the most impactful way, increasing the likelihood of the decision being in your favor.

Lower Costs and Time Saved

When you file the protest yourself, you’re likely to spend hundreds of dollars in hassle costs. On the other hand, when you hire a professional, they handle everything for you.

Knowledgeable Experts

The most notable benefit of relying on a professional service to lower your property taxes is that they will be fully knowledgeable about the tax regulations in your county and what needs to be done for a successful protest. They’ll also know about the deadlines for submitting documents, the paperwork you need to provide, and how best to obtain that paperwork.

Due to this in-depth knowledge, professionals have a higher success rate than homeowners who file their own protests.

Lower Your Tax Rates Today

Do you want to protest your property tax but are worried about the hassle costs? Home Tax Shield serves homeowners like you by protesting property taxes on your behalf.

Using artificial intelligence and data science, our experienced local tax professionals represent you at the ARB hearing every year. Hiring a professional service means that your protest forms will be submitted on time every year with all the required documents and information required for success.

You don’t have to worry about the costs either. Home Tax Shield charges 40% lower fees than other services and offers a three-minute sign-up process for ultimate convenience. Sign up today to save up to $300 or more on your property taxes.

Mar 12th 2022

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