The housing market might have dramatically affected your finances even if you didn’t buy or sell a home in the past few years. Property values have been rising for most Texas homeowners, and property taxes promptly followed. See what general market and tax trends are affecting your area of the state and what individual property tax steps you can take to guard against a Texas property tax increase in 2023.
Why Were Property Taxes So High in Previous Years?
A confluence of factors led to the sharp increase in property taxes that impacted nearly every homeowner across the state.
Out-of-state professionals, younger first-time homebuyers, and even companies continued buying up houses in the state, and the demand far outpaced the available inventory. As a result, prices surged, which affected how appraisal districts assessed the value of properties in their jurisdiction (even properties that didn’t go on the market).
As a homeowner, you may have seen your property’s valuation surge. If you didn’t have a homestead exemption, you might have seen an increase of 19.8% or even higher – in fact, some neighborhoods saw a staggering 100% rise! If you did have a homestead exemption, your property’s tax increase probably butted right up against the 10% cap, even though your value went up a lot more than that.
Related: Is the Tax Assessment the Value of the Property? What’s the Difference?
Property Tax Rates: Will the Percentage Go Up in 2023?
Local news gives us a clear look into the more granular trends affecting Texas and specific metroplexes within the state. Knowing the market effects touching your local region can give you a much clearer insight into whether to expect a Texas property tax increase in 2023. 88.9 KETR in Commerce gives a tepidly pessimistic look at what to anticipate, and it boils down to this: tax rates themselves (the individual levy percentages) may start to go down in some areas, but that’s just likely to blunt the sharp edge of continuing house value increases rather than fully counteract them. Depending on your area, you may continue to see your tax value increase.
Why Property Taxes Are Likely to Increase
Many experts expect a continued increase in property taxes throughout the new year. For most Texans, the total amount due on their property tax bill will be even higher than last year for many different reasons, including:
- Continued demand in the housing market: The peak may be past us, but demand for houses continues to grow. Demand isn’t just surging because more and more people are moving to Texas. It’s also because there’s a shortage of available houses on the market. Fewer people will want to sell their homes now that the red-hot markets of 2021 and early 2022 are tapering off. Housing construction is also still seeing delays from COVID-19-related supply chain disruptions and stalled construction projects. Norada Real Estate Investments sums up the situation best: “The lack of inventory continues to inflate Texas housing prices for now, but many analysts predict that the rate of appreciation will slow down compared to the last two years.” Things are going up less slowly, but they’re still going up.
- Property tax rates may also increase: It’s not just your appraised property valuation that dictates your property tax bill; it’s also the rate established by your local taxing authority. Texas doesn’t have a state income tax, so local city and county governments get their funding from property taxes. If the budget increases higher than in previous years, that difference often results in a higher property tax rate. Many popular metroplexes will increase spending on improvement projects, new roads, new schools, and other amenities. However, even for governments focused on maintenance, the growing cost of labor and materials will still swell the budget.
When property values climb and cities have tight budgets, that can simultaneously raise residents’ property tax bills from two different angles.
Rate Increase Restrictions Temper Tax Increases
Each Texan’s property tax rate is comprised of multiple different levies. These include city taxes, school district taxes, county taxes, and even junior college taxes. Each levy may move up or down independently of the others, so a resident in Frisco may have a different tax rate than a resident in Plano, even though they are both Collin County residents. However, some measures are in place to prevent steep tax rate increases. In 2019, Texas passed a bill that prevented most cities and counties from raising property tax levies under their authority by more than 3.5% without a vote on the matter; this change went into effect in 2020, and it’s helped to keep most homeowners from seeing their property tax rate suddenly jump up.
Also, cities like Fort Worth are proposing tax rate decreases. The City Council is considering a property tax rate reduction of 2% because of the city’s continued recovery from COVID-19 and positive job growth. Based on this proposed reduction by City Manager David Cooke, a $200,000 home would receive a $1,425 tax break, which can certainly take the edge off of continued increases in property valuations.
Because so many different market factors determine the tax levies a city or county may impose, it’s impossible to fully predict what rates will look like in the coming months.
Related: House Prices and Property Taxes: How Are They Related?
Finding Your Effective Tax Rate
Your effective tax rate will also differ from the aggregate of all the tax levies that apply to your residential property. Property tax exemptions can withhold part of your property’s value from tax calculations, effectively lowering your tax rate and saving you money. For example, if you own your primary residence, you likely qualify for a $40,000 exemption on your local school district taxes. If you are older than 65 or qualify for a disability exemption, that grows to $50,000. Different provisions allow for additional protections based on a homeowner’s specific qualifications, needs, and the type of property they own.
These individual exemptions and exceptions can help you calculate your effective tax rate, the percentage rate of your property’s value that you are charged once everything is considered.
Note: Most taxing authorities have an appraisal district website to catalog the various exemptions that apply to each residential property in their jurisdiction. If you need help determining what exemptions you have on your home or think you qualify, search for your property’s records to ensure you have all the eligible exemptions. Some provisions have specific deadlines and requirements, so doing this can simplify things later when you pay or protest your property taxes.
Property Tax Totals: What You Can Expect in 2023
Now that we’ve investigated the trends affecting specific metroplexes and the state, it’s time to start setting expectations for your property tax bill.
Why You’re Likely to See a Texas Property Tax Increase in 2023
The Texas housing market may be over the most significant peaks, but you’re likely to see a slower increase in property valuations, not a decrease. The residual effects from the previous years’ market will continue to pop up. Your local taxing authority recalculates your property value each year and formally reappraises it at least once every three years (but often yearly). So the house sales and market price jumps will continue to affect those calculations and appraisals for years to come until things level out.
Some individual factors can also increase your home’s value. If you’ve recently replaced the roof (which happens very frequently in hail-affected regions of Texas), renovated your kitchen or bathrooms, or made other improvements, the stated value of your home may reflect those changes. These fall outside the 10% cap established by a homestead exemption, so prepare for a more significant tax jump.
What You Can Do to Stop Steep Property Value Increases
Fortunately, you can also take some individual measures to fight against a Texas property tax increase in 2023. Consider taking these steps as soon as possible to lower your taxes or be sure you’re receiving the fairest possible rate.
- File for the exemptions you qualify for: Qualifying homeowners should file for a homestead exemption on their primary residence. Senior residents and residents with disabilities may be eligible for additional discounts. Ensure those exemptions are applied to your property tax bill by verifying they’re still active on your property records.
- Protest your property’s appraised value: If you think the appraisal district’s appraisal of your home is inflated or inaccurate, you can file an official notice of protest or hire a professional to do so. This process allows you to make a counter-valuation, provide evidence as to why you think the assessor is wrong, and even present your case in front of a panel of residents.
Get Support When You Fight Texas Property Tax Increases for 2023
At Home Tax Shield, we help homeowners across the state make their case for fairer property taxes. We objectively value your property, help you file a protest and gather evidence for your hearing. Our local professionals have the experience and expertise to handle the process on your behalf. Sign up today to start preparing for your 2023 property taxes.