Texans saw increasingly high property taxes throughout the start of the decade, and this financial burden drove legislators to offer a solution. The property tax code revisions approved in 2023 offer tax relief in the form of increased exemptions, caps on property value increases, and new provisions for appraisal review boards. But that action is only a partial solution.
While it tackles the taxable value of homes and the finalized property tax bills, it doesn’t address the staggering increase in property appraisal values. The legislation also doesn’t prevent future increases. Instead, property owners have to act on their own to solve high property tax bills through established mechanisms like property tax protests and filing the exemptions they qualify for. Taking these steps will help you maximize the potential savings that the 2023 tax code changes offer.
How Are Taxes Calculated in Texas?
Before you can effectively fight to reduce your property taxes, it helps to know how they’re calculated in the first place. Three main phases determine what your property tax bill will look like every year:
Phase 1. Determining the Tax Rates That Apply to Your Home or Other Properties
While the state establishes the procedures for calculating and collecting taxes, local governments determine the tax rates that apply to homes in different cities, counties, or municipalities. Broadly speaking, local governments establish their budgets and then consider that cost across the taxable properties in their jurisdiction to set the tax rates for projects. On your property tax bill every year, you’ll generally see four different levies: school district taxes, community college taxes, city taxes, and county taxes.
When budgets go up or down, the tax rates can move up and down accordingly. Currently, Texas has a median property tax rate of 1.74%. Although, this varies greatly across the state.
Phase 2. Appraising Your Home’s Market Value
County appraisers evaluate the market value of homes in their jurisdiction. Each home must be individually appraised at least once every three years with software-supported staff adjusting the appraisal in the intervening years. The valuation is determined as of January 1st of the given tax year. That value is determined based on factors like:
- The size and style of your home
- The market in your neighborhood or area
- The age of your home
- Improvements made over time
- Easements or other features that uniquely affect your home’s value
This value can also increase or decrease from year to year.
Phase 3. Calculating Your Home’s Taxable Value
After county appraisers determine the appraisal value of your home, the district roll is finalized and sent to your local tax assessor’s office. There, tax officials use the appraisal value and any exemptions on your home to determine its taxable value for each levy you’re obligated to pay. The total for each levy is added up, and you’re issued a total property tax bill in October of the tax year with payment due by January 31st.
Related: Deciphering Taxes: What to Know About Falling Values in Texas
This entire process is cyclical and extends across the year. Your home’s appraisal value is calculated based on its market value as of January 1st, and your local appraisal district will send you a notice by the end of April. During June, those appraisal values are finalized and sent to the tax offices. There are a lot of behind-the-scenes details in every step, but understanding the general process can help you identify key moments where you can intervene and reduce your property tax rate.
Intervene at Every Stage to Control Your Property Taxes
Now that we’ve established a general roadmap of how property taxes are calculated, we can take a closer look at what you can do to reduce your property taxes at each of these three major segments of the process.
1. Stay Informed on Changing Tax Rates and Budget Changes
Local governments can increase city or government budgets, but they can only increase the amount they gather through property taxes by a certain amount. If they want to increase property tax collections by more than 3.5%, it has to be presented to voters, and voters have to approve it.
At this stage, individual voters only have a small bit of control over whether tax revenue (and through that, tax rates) go up or down.
2. Protest Your Property’s Appraisal Value
A property tax protest is one of the most impactful ways to reduce your tax obligations. When local appraisers calculate your home’s value every year, there are a lot of ways they can get an inaccurate value:
- They base value increases on overly generalized market trends.
- They compare your property against nearby homes that aren’t truly comparable, such as homes that are newer, bigger, or have recently been renovated and resold.
- They don’t consider unique impediments to your property, such as an easement, being near power lines, or other factors.
These oversights can occur often throughout the process, but no one knows your home better than you do. If you think the new appraisal value is inaccurate, you can file a protest notice with a counter-valuation and evidence to support your claim. This process culminates in a hearing in front of an Appraisal Review Board (ARB) where you and a representative from the appraisal district office present arguments. The best strategy is to protest your property’s appraisal value every year and consistently argue it down to the lowest fair value possible.
Protesting property taxes is important because:
- The appraisal value is what tax assessors use to start calculating your property’s taxable value. When this number is lower, it benefits you throughout the rest of the process.
- Other forms of tax relief, such as exemptions and homestead caps, only apply to the taxable value. Protesting is the only recourse you have to lower your appraisal value.
3. File Exemptions to Reduce Your Property’s Taxable Value
You can file exemptions that change how the county tax assessors calculate your home’s taxable value and final tax bill. There are many different exemptions, including:
- Homestead exemption: This measure removes $100,000 of your home’s value for the purpose of calculating school district taxes. It also imposes a 10% cap so the taxable value of your home cannot increase by more than 10% each year. (The only exception is for any improvements you’ve made to your property that will increase the value.)
- Over-65 and disabled exemptions: Either one will remove another $10,000 from school district tax calculations, resulting in another small decrease to your tax bill. Property owners can only hold one or the other exemption, and the over-65 exemption offers additional tax benefits. There is another exemption for disabled veterans that is determined based on VA disability rating criteria.
- Agriculture exemption: This exemption doesn’t decrease your property’s taxable value by a flat amount. Instead, it’s an alternative approach to calculating your property’s value. Rather than measuring the market value, it measures the production value.
Related: Tax Protest Strategies: How to Lower Your Property Taxes Effectively
The recent changes to Texas’s property tax code also include a 20% cap on qualifying properties below $5 million as part of a three-year test program. This measure means qualifying properties cannot have their values increase by more than 20% for a given year.
A Closer Look at Protesting Your Property Taxes
Every homeowner has a right to protest their property taxes and ensure they’re paying a fair amount in Texas. Savvy homeowners protest their property taxes every year to keep their property values and tax bills under control.
Why It Matters
Some people may wonder why protesting property taxes is important if they have a homestead exemption. After all, the homestead exemption caps taxable value increases at 10% each year. But that doesn’t mean your appraisal value doesn’t matter. Here’s why every homeowner should protest each year, even if they have exemptions in place:
- You might not always have an exemption. For example, if you move to another home and keep your current property as a rental investment, the homestead exemption will no longer shield you. Also, if you’re considering putting your home in a trust as part of your estate plan, not all trusts can be considered Qualifying Trusts that let you keep your exemption.
- Having a large gap between your appraisal value and your taxable value is risky. Currently, the Texas real estate market has slowed down, and appraisal value increases might be slowing down with it. But if you have a large gap between the two values during a market slowdown, it might take years for your taxable value to “bridge the gap” and start slowing down too. The more you protest your appraisal value over time, the smaller that gap will be.
Two Possible Approaches
Homeowners can either represent themselves throughout the entire protest process or hire a service to represent them. If you represent yourself, you’ll need to file a protest form by the spring deadline, negotiate potential appraisal value compromises with the county, and represent yourself in a formal hearing. If you hire a service, they can handle the entire process on your behalf. You can even hire services on a recurring basis so they protest every year for you, even if it slips your mind.
Protest Your Texas Property Taxes as Your Solution to High Property Taxes
Property appraisal values and tax bills continue to be very high in Texas, even with recent changes in property tax processes. Actively taking steps to reduce your home’s appraisal value and taxable value is the only solution. At Home Tax Shield, we represent homeowners and protest on their behalf to make sure they have the lowest possible appraisal values every year. Sign up today to start fighting high property tax bills in 2024.