What Are Property Tax Exemptions and How Do Property Owners Get Them?
Texas is unique in that it is one of only nine states in the country that do not have personal state income taxes. Great news, right? Well, partially. We still have to pay for public services, such as public schools and libraries, road and park maintenance, emergency services, and state employees. For Texas, the funds come primarily from property taxes, and about 4,000 local entities collect property taxes.
As you might expect, the lack of state income tax in Texas means Texas property taxes are among the highest in the country. They’re also rather complicated to calculate. Depending on the source and how they calculated tax burdens, the tax rate varies. WalletHub recently reported that in total, the median Texas household has a state and local tax rate of 12.73%, yet the Tax Foundation estimates Texas’ tax rate is closer to 11.8%.
What Types of Property Tax Exemptions Are Available to Texas Property Owners?
Texas offers partial, total, lump sum, and percentage property tax exemptions to reduce the tax burden for many. A partial exemption is most common and removes a percentage or a fixed dollar amount of a property’s appraised value from taxation. A total exemption excludes the property’s entire appraised value from taxation. You must apply for a tax exemption appraisal district will determine if you qualify for an exemption. You can appeal the appraiser’s exemption denial by engaging in a formal protest; however, there are several rules, deadlines and processes to follow.
Currently, there are many partial or total exemptions, but the following are the most common:
- Residence Homestead
- Inherited Residence Homestead
- Age 65 or Older or Disabled Persons
- Disabled Veterans and Surviving Spouses of Disabled Veterans
- Surviving Spouses of First Responders Killed in the Line of Duty
Depending on your situation, you may be able to apply for multiple exemptions, such as if you are a homeowner and a disabled veteran. Keep in mind that exemptions do not impact your tax rate or your property valuation. Property tax exemptions simply reduce the allowable taxable amount of your property. With a lower taxable amount, you will see a lower tax bill.
Texas Property Tax Exemption Resources
The Property Tax Assistance Division of the Texas Comptroller of Public Accounts offers a video overview of Texas property taxes, allowed exemptions based on your eligibility and qualifications, and your rights as a property owner to protest exemption status.
Understanding the 10% Homestead Exemption Cap
There are several different homestead exemptions available to those who qualify. The 10% homestead exemption cap is one that helps homeowners whose property is their primary residence where they’ve lived for a full year or more. Learn more details and other key considerations about this exemption.
H3: What to Know About the Veterans Property Tax Exemption in Texas
Disabled veterans in Texas and their surviving spouses have special provisions when it comes to property taxes. If you are a disabled veteran or surviving spouse, you may qualify for a partial or full exemption, depending on the extent of your disability as determined by your U.S. Veterans’ Administration disability rating. You may also benefit from the new proposed legislation to raise the exemption for the disabled.
Ultimate Guide to Over 65 Property Tax Exemptions
Are you over 65 or nearing it? You may qualify for the Over 65 property tax exemption that exempts you from your county’s school district taxes. This property tax exemption is in conjunction with the general homestead exemption, reducing your tax bill considerably. Even better, the new state legislation now awaiting approval by the House could raise your exemption even further.
What Is the Current State of Texas Property Tax Exemptions?
Texas property taxes just got a whole lot more complicated. The Texas Senate overwhelmingly passed a $16.5 billion package to lower property taxes, the largest property tax cut in history for our state. Homeowners won’t see anything, however, until the House signs on the dotted line and voters approve it.
What does this mean for Texas? Quite a bit — for homeowners, business owners, and school districts. There are three Senate Bills on the table and a constitutional amendment. The Texan reports that all of these are intended to bring notable relief to Texans, saying, “The Senate’s model for tax relief includes $6.1 billion to continue previous levels of rate compression, $5.4 billion for additional compression, $3 billion to raise the school district homestead exemption, $500 million to raise the over-65 and disabled homestead exemption, and $1.5 billion to increase the business personal property tax exemption and create an inventory tax credit. The slate also reduces the number of schools subject to recapture by lowering the district’s maximum compressed rate in the school finance equation.”
As we said, rather complicated. In a nutshell, if the House passes this package, Texas voters get to decide. If approved, the average homeowner is expected to see their property tax bill decrease by about $800. And if you are over 65 or disabled, you could see your bill decrease by $1,000.
Senate Bills under House consideration:
Senate Bill 3 (SB3) — Impacts the state’s homestead exemption by increasing the portion of a home’s value that cannot be taxed from the current $40,000 to the proposed $70,000. Lawmakers say the average Texas homeowner would save $341 each year if this bill passes.
Senate Bill 4 (SB4) — Cuts school property tax rates by $0.07 per $100 value, with the state picking up the slack by providing districts with at least $5.38 billion from the “rainy day fund.”
Senate Bill 5 (SB5) — Increases the business personal property’s value that cannot be taxed from the current $2,500 to the proposed $25,000, plus a 20% credit for the taxes they pay on inventory and property.
According to the Texas Tribune, lawmakers have also filed several bills to lower the 10% homestead cap to just 5%, meaning a homestead property’s appraised value cannot increase by more than 5% each year.
Is It Worth Protesting Property Taxes in Light of the New Senate Bills?
Yes, protesting your property tax bill in Texas is always a good practice. For starters, the Senate bills are not in effect and will not impact your property tax bill this year or likely next year. It will take time for the House to review and vote on the bill. From there, the bill goes to the voters to ultimately decide whether the Senate bills will become law.
While the bills sound like a slam dunk, they aren’t. There are plenty of people opposed to the bills or at least parts of the bills. For instance, Texans must realize that reductions in money collected by local entities will need to be supplemented by funds from somewhere else. In the case of the school districts, that money is to come from the state itself. There is debate as to where the government would recoup a 5% homestead cap reduction. Most say it will come from business owners and renters, as landlords will pass their higher taxes onto their residents.
Take Advantage of Property Tax Exemptions
Property tax exemptions can bring you a little or quite a bit of tax bill relief and are worth filing for each year. We’ve put together more resources to help you understand more about Texas property tax exemptions and related articles to guide you through the property tax process.
Texas Property Tax Exemptions that Benefit Residential Homebuyers
If you’re buying a new home or just moved in, there are important property tax considerations unique to you. For instance, you may be dealing with prorated taxes, escrow accounts, and property values higher than you may have expected. Learn how property taxes work for new buyers and what you can expect.
What Real Estate Agents and Clients Should Know About Property Taxes
Real estate agents are often asked a lot of questions about property values and property taxes by their clients. Buying a new home brings up concerns about the true cost of a property, and tax bills can be drastically different in different neighborhoods. Whether you are an agent or shopping for a new house, it’s important to understand the different tax rates across districts, the differences between an assessment and an appraisal, and when to apply for exemptions.
5 Reasons Texans Should Protest Their Property Taxes
If you are a Texas homeowner, you will be receiving a Notice of Appraised Value soon. And when you open it, there’s a high likelihood that it’s higher than you imagined. Fortunately, you don’t have to accept the valuation is accurate and fair. The appraisal process is not perfect, giving you the opportunity to protest.
Texas Property Taxes: Everything You Need to Know About Protesting
We developed another resource page detailing the reasons to protest and the process if you do it yourself or hire property tax experts.