Texas property tax law changes every few years. See the latest posts for the most up-to-date information.
According to Rocket Mortgage, Texas has the seventh-largest property tax rate in the United States. The state depends on property taxes to fund state operations as opposed to income tax on its residents. These taxes provide the largest source of revenue for the state government to support services, including education, infrastructure, emergency response, policing, and fire protection.
Texas laws and Tax Codes establish the process followed by local officials in determining the value of the property, ensuring that the values are equal and uniform. Since there is no state property tax, the constitution and statutory laws authorize local governments to collect the tax. But that doesn’t always mean your tax rate or tax bill is fair.
How Texas Property Taxes Work
Residential property in Texas is appraised annually by the county appraisal district. Hence, the state is not responsible for setting tax rates, collecting taxes, and settling any disputes arising between residents and the local government. The appraising districts are responsible for determining the current market value of all the properties within the county and on which the tax payments are based. Any disagreements that may arise are brought to an appraisal review board comprising local citizens.
There are some important dates to remember. At the beginning of every year, the county appraises homes, and the appraisal review board hearings commence at the end of May. The county’s tax assessor-collector then sends out the tax bails commencing October with a due date of January 31 the following year.
As a Texas property owner, you might qualify for a reduction in the taxable appraised value of your property, thereby reducing your tax bill. These Texas property tax reductions are referred to as property tax exemptions and are often the common way for property owners to reduce their tax burden.
Determining Texas Property Tax Rates
Property taxes are levied as a percentage of each home’s appraised value under the Texas Constitution and Texas Code. Each county appraisal district is required to determine the value of properties within its district at least once every three years. The same methods and techniques must be used for appraising the same property. Any mass appraisals performed must conform to the Uniform Standards of Professional Appraisal Practice to ensure equal treatment for all properties.
For individual property owners, the tax amount is based on the market value of your property. The county district will perform the real estate appraisal by comparing your property to other properties within your neighborhood. For instance, they will take the existing market value of the sold homes to set the value. The value is then multiplied by the tax rate to determine the tax bill.
H3: Related: How Is Property Tax Calculated?
Besides comparing the value of your property against the market rate, your property may be assessed through construction costs (as if it were built from the ground up). The appraiser also accounts for depreciation and the value of the land. For commercial properties, the value is mainly based on the value of the property or business income.
The set tax rate for every taxing entity is principally based on the district revenue and the annual budget. Hence, the tax authorities can calculate the property tax based on the established property value.
Property Tax Exemptions Available in Texas
Texas offers a variety of partial or total absolute tax exemptions from appraised property values used to determine local property taxes. According to the state comptroller, a partial exemption removes a percentage or fixed amount from taxation, while a total exemption excludes the entire property’s appraised value from taxation.
The state requires taxing units to offer certain mandatory exemptions and have the option to decide locally whether or not to offer them. In most cases, you need to apply for tax exemption with the appraisal district within which the property is located. Among the various property tax exemptions that Texan property owners can use include:
1. Tax protest
Texas homeowners pay huge amounts of property tax. However, every citizen is entitled to lower property taxes if their rates are unfair. If you believe the appraisal district has set the appraisal above the market value or that the appraisal done is not equal to similar properties in your area, you can protest your property tax. You will be required to file an appeal through the Notice of Protest (PDF) with the ARB.
Every home value is different; hence if you expect to reduce your tax burden, you will need the help of a property tax company to assist in the protest. An experienced property tax company will conduct an in-depth custom analysis of your home, a comprehensive analysis of your neighborhood and comparable properties within your area, and a strategy for the burden of proof for the property when meeting with the central appraisal district. Furthermore, they will advocate for lowering the value to reduce your tax bill liability.
H3: Related Video: Need to Learn More About Property Taxes?
Why you should protest
Property values aren’t always correct for a variety of reasons, such as:
- Your home has never been individually appraised: Oftentimes, the proposed value of your home is based on a mass appraisal. It is likely that the appraisal district does not have the manpower or time available to appraise each and every home, so they take the average value of all of the surrounding homes.
- Assessed home values are sensitive to economic growth and decline: due to economic growth, your local appraisal district increases values, but when the economy declines, it is reluctant to reduce your valuation.
- Homes sold for foreclosure can reduce your property value: Effective January 2010, the chief appraiser in appraising a residence homestead may not exclude comparable homes that sold for foreclosure in any of the three years preceding the tax year.
The most common approach to a tax protest appeal is to compare the appraisal being protested to other appraised values within the same neighborhoods. Property owners can either hire a property tax company to contest their property taxes for them or they can protest themselves.
The protest requirements and process can be labor-intensive and time-consuming. You have to do your research, complete forms, meet deadlines, appear in person, and present your arguments (with proof) with The Tax Code sections 41.43 and 42.25, claiming that your appraisal is greater than the median appraised value of a reasonable number of comparable properties appropriately adjusted. Property owners do not have to allege that their tax appraisal is greater than the market value of a property, just that its appraisal is higher than the appraisal of certain other properties.
2. Resident Homestead exemption
Texan homeowners receive homestead exemptions from cities, counties, schools, and special districts that reduce the taxable value of their homes. The exemption, known as a flat dollar exemption, reduces the taxable value of all homes by the same dollar amount of $25,000. Under Tax Code 11.13 (b), school districts are required to provide a $25,000 exemption on a residence homestead. In most school districts, this exemption reduces the school property taxes that homeowners pay by more than $250 a year.
The Texas property tax reduction will increase by between $15,000 and $40,000 for the 2022 tax year after the scheduled voter approval on May 7, 2022. Effective January 1, 2022, the property tax exemption changed to benefit new property owners by allowing the homestead exemption for a partial year. Previously, homesteads acquired after January 1 were not eligible for the exemption until the following tax year.
3. Senior and Disabled Person Exemption
Over and above the homestead tax, senior citizens 65 years or older or disabled are entitled to an additional $10,000 residence homestead exemption. To qualify for property tax exemptions for senior citizens, the owner must meet the age requirements and ensure they live in the stated house. If the homeowner passes away, the surviving spouse may still be eligible for the local exemption if they are above 55 or and own and live in the homestead.
While these exemptions cover two different demographics, you can only qualify for one at a time. This means that if you are 65 or older and disabled, you are not automatically eligible for both exemptions. You will be required to choose either the Texas property tax exemption for those over 65 or the disability exemption.
4. Veteran Exemption
The Texas Tax Code section 11.22 provides a partial tax exemption for property owned by disabled veterans. The amount will vary based on the evaluated disability rating. Surviving spouses who do not remarry as well as their children below the age of 18 and unmarried can also claim for tax emotions. In some cases, a disabled veteran with a service-connected disability and a 100% disability rating or individual unemployability qualifies for a total property tax exemption on their homestead.
To qualify for the disabled veteran exemption, you must be a veteran who sustained disability while serving with the U.S. armed forces. You must be classified as disabled by the Veteran’s Administration or the branch of the armed services in which you served and have a service-connected disability. The disabled veteran must be a Texas resident and must choose one property to receive the exemption, if multiple properties are there. Furthermore, any property donated by a charitable organization to a veteran is also entitled to partial tax exemptions.
5. Texas Property Tax Exemptions in Agriculture
The Texas property tax agricultural exemption is not an actual exemption but an appraisal for land based on its agricultural use in crop or livestock production. Landowners who use their land for agriculture may qualify for this appraisal based on productivity rather than the market value of the land.
Usually, the productivity value of the land tends to be lower, which helps in reducing the landowner’s tax burden. Only land that is primarily used and has been used for at least five of the past seven years for agricultural purposes may qualify for an exemption in Texas. Many counties have implemented a minimum acreage requirement, and some also consider the agricultural degree of intensity.
Lower Your Property Taxes
Homeowners in Texas end up paying large sums to the government as they do not explore the exemption options available for lower property taxes. In other cases, homeowners do not know they have a right to protest against high tax bills. Fortunately, you have options when it comes to your property tax bill, and many homeowners successfully reduce their tax rates.
At Home Tax Shield, we leverage sophisticated AI and data analytics technology to help you determine the fairness of your property appraisal and represent you in your tax protest appeal hearing to ensure you pay fair and equitable tax rates. Sign up here to get assistance on your appeal.