Owning a property in Texas is a joy, but it comes with a tax bill that can add financial strain to your household. With recent reports revealing Texan families pay an average of $3,797 annually in property taxes, The Lone Star State is among the U.S. states with the highest property taxes.
The state doesn’t collect income tax, so property taxes are the primary source of revenue that the local government uses to pay for vital services, such as schools, police, and public healthcare. Fortunately, there are several ways to reduce your tax burden and save more of your money. Let’s explore how the tax system works before delving into a few tips and tricks to help lower your property taxes.
How Do Texas Property Taxes Work?
Property taxes are determined by the assessed value and tax rates. All taxable properties in the Lone Star State are appraised as of January 1st each year. During the appraisal, over 40 data parts are used and each property is given a single market value that it would sell for under the current conditions. To ensure fair treatment, appraisers use mass appraisal techniques determined by the county appraisal district (CAD) and based on factors like location, condition, size, and upgrades.
On the other hand, tax rates vary depending on the taxing entities related to each property, such as city, school, and water districts. In essence, each entity comes up with its own tax rate. As a homeowner, you’ll have several entities authorized to tax your property.
The property’s taxes are then calculated by multiplying the tax rate (millage rate) by the assessed value: Tax rate x assessed value = property tax.
Related: Lowering Property Taxes For Texas Homeowners: Home Tax Shield 2023 Results
Here is a step-by-step guide on how the property tax system works and the crucial deadlines to keep in mind:
Step 1: Appraisal
The property tax process begins with the appraisal of a property. This process is undertaken by your CAD as of January 1st of the current tax year. As mentioned earlier, the CAD takes into account factors such as the property’s size, location, condition, and any improvements or modifications made to the property.
Step 2: Notice of Appraised Value
Once the appraisal process is concluded, a Notice of Appraised Value is sent to the property owner. The notice for residence homesteads is typically sent in April. It reveals the appraised value of the property and any applicable exemptions. If you believe the value is too high, you can take steps to protest.
Step 3: Setting of Tax Rate
Once the CAD has determined the value of your property, your local taxing unit sets its tax rates. This process is done before September 30th or within 60 days following the receipt of the certified appraisal roll by the taxing unit, whichever date comes later.
As stated earlier, the taxing units vary and may include county, city, school district, and other local entities providing services in your area. The tax rate is expressed as the percentage of the property’s appraised value.
Step 4: Tax Bill
The final step involves sending a tax bill to the property owner. The tax bill shows the amount of taxes owed for the year and exemptions that apply, among other details. Tax bills are usually mailed to homeowners in October and are due immediately upon receipt. However, you have until January 31st of the subsequent year to pay your taxes.
Tips To Lower Your Property Taxes
As a homeowner, there are strategies you can implement to decrease the amount you owe each year. Here are a few tips to help you lower your property taxes in Texas:
File a Protest
One of the most effective ways to lower your property taxes is to challenge your property appraisal. Tax Code Section 25.18 mandates all appraisal districts to complete appraisals on each property at least once every three years.
Since there is a high volume of property appraisals in regions, appraisal districts often resort to mass appraisals. This technique is a blanket way of appraising properties in the entire county, neighborhood, and community at once. Mass appraisal often results in errors since it ignores unique issues that could help lower your appraisal.
If you believe the market value is too high, you can file a protest with the appraisal district. A protest will trigger a review of your property’s value and could lead to a lower appraisal and reduced tax bills.
- Pro tip: The deadline to protest property taxes in Texas is a hard deadline—late protests are rarely accepted. The deadline is May 15th or within 30 days of the CAD sending an appraisal letter, whichever date comes later. The 30-day countdown kicks off when the CAD mails the assessment letter and not when you receive it. If you miss this deadline, you risk losing your right to protest your property’s taxable value. However, you may file a late property tax protest if you are an active military serviceman or away from home due to official duties.
File for Homestead Exemptions
You can also lower your property taxes by filing a homestead exemption. In Texas, you can claim a homestead exemption based on whether you live in the home, are a military veteran, have a disability, or are 65 years or older. Residential property situated on up to 20 acres of land usually qualifies. A manufactured home or rented lot may qualify, provided you own the property. The amount of the exemption varies based on the county but is usually approximately 20% of the home’s value.
Related: Beyond the Homestead Exemption: Lesser-Known Tax Exemptions in Texas
The following is a preview of how much you can save with a homestead exemption:
- General residence homestead exemption: This is a $100,000 school tax exemption to lower your tax bill. With this, your school taxes are calculated as though your home is worth $100,000 less. For instance, if your home’s appraisal stands at $400,000, you will only be taxed based on a value of $300,000.
- Local residence homestead exemption: Some local governments provide additional homestead exemptions for school taxes. The exemptions are typically calculated as a percentage of the homestead value. For instance, a 20% local exemption applied to a $300,000 homestead reduces the taxable amount to $240,000.
- Elderly and disabled homestead exemptions: Elderly or disabled residents in Texas qualify for an additional $10,000 school tax exemption. There are some regions with higher local exemptions for these groups. Additionally, elderly and disabled persons qualify for at least a $3,000 homestead exemption when county taxes are collected for farm-to-market road maintenance and flood control.
- Veteran homestead exemptions: The veteran homestead exemption is determined by the individual disability rating. As such, a veteran with a disability rating of 100% gets a full exemption. If your disability rating is 70–99%, you qualify for a $12,000 homestead exemption. A 50–69% disability rating gives you a $10,000 exemption, while a 30–49% rating gives you a $7,500 exemption. Upon the death of a disabled veteran, the surviving spouse continues to get an exemption at the same rating until they remarry. If the veteran spouse dies before the veteran, the surviving children under 18 split the exemption equally.
Take Advantage of Other Tax Exemptions
Apart from the residence homestead tax exemption, Texas offers others to help lower your tax bill. If you qualify for the following exemptions, make sure you maximize them to lower your property tax bill:
- Donated homesteads: Tax Code Section 11.132 offers a partial exemption for residence homesteads donated by charities to disabled veterans. This benefit extends to surviving spouses who have not entered into another marriage. The exemption value is calculated based on the degree of service-related disability.
- Tax exemptions on agriculture: The Texas property tax agricultural exemption is an appraisal for land based on agricultural use. If you are a landowner using your land for agriculture, you could qualify for this special appraisal based on the productivity of your land rather than market value.
- Renewable energy exemptions: As per Tax Code Section 11.27, property owners could qualify for a tax exemption if they have a solar or wind-powered energy device installed on their property. Check the Texas Comptroller’s website for forms to apply with the chief appraiser of your district.
- Surviving spouse of first responder exemptions: Tax Code Section 11.134 provides a total property tax exemption on residence homestead to the surviving spouse of a first responder killed or fatally injured in the line of duty.
Pay Your Taxes on Time
You can avoid unnecessary penalties and interest charges by paying your property taxes on time—even if you think they need to be corrected. In Texas, property taxes are due on January 31st of each year. Late taxes result in penalties and interest charges that add up quickly. Timely tax payment helps you avoid additional costs and potential issues that could increase your overall expenses related to property ownership.
Take Advantage of Solutions To Help Lower Your Tax Bill
Although Texas is famed for a friendly environment and low taxes, property taxes can be a massive strain for residents. Luckily, there are plenty of strategies to help you lower your tax bill. If you need help saving on your property taxes, the experts at Home Tax Shield are ready to help. We provide a revolutionary property tax platform that infuses cutting-edge technology and local experience into the valuation and protest process. We strive to ensure that you don’t pay a dollar more than you should on your property taxes each year. Sign up today to schedule a free consultation.