What Is the Difference Between Taxable Values & Tax Rates?
When you open your property tax bill each year, have you ever wondered what’s behind the dollar amount you owe? There are three primary factors that influence your total tax bill: your taxable property value as appraised by your county’s appraisal district, your tax rate as set by your local taxing entities, and the exemptions you file that reduce your property tax value.
Your estimated appraised value is simply the amount your appraisal district believes your property is currently worth — what it would likely sell for in today’s market. And those values? Many Texas counties have seen average tax values increasing by 12-26% in one year. It’s why Texas saw a record number of homeowners filing protests last year.
Of course, the actual market value of your home can be quite different. You could sell your home for more or less than what the appraisal says. Because determining taxable values is not an exact science, homeowners have the right to protest the appraised value if they believe it is not accurate or fair.
Then, there’s the tax rate. The Texas legislature does not set your tax rate. More than 4,796 local jurisdictions in Texas do, such as your local school district (whether you have a student who attends the district schools or not), your city, your county, and often a variety of special districts, such as a hospital district, junior college district or water district. Unlike property appraised values, you cannot protest your tax rates.
How Are Taxable Values and Rates Calculated?
There is a simple calculation that determines your property tax bill:
Your property tax value – exemptions x property tax rate = your taxes due
While this formula is straightforward, how each entity gets its numbers is not. We’ll try to summarize it here, but be sure to check out the additional resources we have below to go more in-depth.
The appraisal district calculates your property value by taking its estimated market value as of January 1st. They get to this number by considering multiple factors, such as the market area, demand, the size and age of your property, and recent property sales. They then reduce the amount by any exemptions that may apply, such as the homestead exemption. The lower your taxable property value, the lower your bill, so you want to maximize exemptions. Sadly, many property owners aren’t aware of many exemptions that may apply to them, so be sure to read our Exemptions page to learn more.
Once calculated, the chief appraiser sends their assessed values to local jurisdictions that then levy their own taxes on those properties. These entities have to get voters to approve their proposed tax rate if it increases by more than 3.5%. This is the only chance you have to voice your concerns about tax rates. Once voters approve them, you cannot protest them when you get your tax bill.
Taxable Values & Tax Rate Resources
Property Tax System Basics
There’s no better expert than the Texas State Comptroller. Their website is full of helpful information, including this Property Tax System Basics web page. It goes into more detail about many of the topics we’ve covered here, and it’s worth the read.
Read the article here.
What Is the Difference Between the Appraised Value and the Market Value of Homes?
Depending on your county, your assessed home value can differ from the market value of your home. Learn how each is determined and why it matters, especially if you are buying or selling your home or plan to protest your property taxes.
Read the article here.
Why Are Property Taxes in Texas So High?
As the saying goes, “Everything is bigger in Texas!” That includes your property tax bill. Texas has one of the highest property taxes in the country, but why? Learn more about how property taxes work in the Lone Star State and what you can do to reduce your tax bill.
Read the blog here.
Will Your Property Taxes Increase if Tax Rates Decrease?
Every jurisdiction with the right to tax property owners must set their tax rates by the end of September so that they are reflected in your October tax bill. Tax rates can decrease, as they did recently with Austin ISD. That would mean that at least you get a slight break in your bill, right? Not exactly.
Even if a jurisdiction lowered its tax rate, if your property’s appraised value increased, you will most likely still see a higher property tax bill. The high property values that keep escalating negate any benefit from lower tax rates.
Will the homestead exemption help?
The homestead exemption places a 10% cap on your home’s taxable value. If your property is your primary residence, you can take advantage of this benefit. If you own other properties, such as rental properties or a second home in Texas, there is no limit as to how high your values can be assessed, and exemptions do not apply.
But while the homestead exemption definitely helps, remember that it’s calculated every year. In essence, the district can raise your property value assessment by 10% every year. That means your property tax bill would double in about seven years.
What You Can Do About Your Property Tax Bill
Remember, you can’t do much about your tax rate other than vote against tax hikes during an election. Thankfully, you can often do something about your taxable property value.
You have rights when it comes to your property appraisal. First of all, there are exemptions you can leverage to lower your taxable value. As we said, there is the homestead exemption, which reduces the appraised home value by $40,000 and caps potential increases in your home’s appraised value by 10%.
But there are several other exemptions that you may qualify for, such as if you are over 65 years old or a disabled veteran. You can remove thousands of more dollars from your property appraisal by claiming these if they apply.
The most control you have, however, is with your right to formally protest your appraised property value. You don’t have to wait until you receive your property tax bill, either. As a matter of fact, if you wait until your bill arrives, you will miss the protest deadline.
By April 1st of each year, the chief appraiser begins sending out Notices of Appraised Value to any property owners who will see an increase of at least $1,000 in their appraised value. If you get this notice, you want to act if you believe the amount is more than you should rightly pay.
Protesting is time-consuming and, for many, labor-intensive and risky. It’s one of the reasons so many Texans hire property tax protesting companies to do it for them. These experts know what paperwork is required and deadlines, will go to the hearings for you and face the appraisal review board. Many companies will do this for you every year, so you only have to give them your property address, and they do the rest.
Educate Yourself on How Property Taxes Work and Your Rights
Property taxes are confusing, complicated and specific. It can be overwhelming to try to understand it all, especially when legislation can change what you thought you knew. We’ve put together more resources to help you navigate Texas property taxes further, but experts all agree that your best bet is to protest annually, even if it’s a long shot. Even a few hundred dollar reduction in your property value has a compounding effect that adds up. One thing is for sure, if you don’t protest, you are guaranteed not to get your tax bill lowered.
Falling Property Values: When Do They Impact Property Taxes?
Tax property values in Texas fluctuate, as do market values. How do they relate and differ, and what does it mean for your property taxes? Learn how higher or lower property values impact appraisal calculations that determine your property tax bill.
Read the blog here.
What the Bleep Is Going on With Texas Property Taxes?
Texas Monthly published an informative article that breaks down some of the driving factors of Texas property taxes and dispels a common myth that rising property values is due to the influx of Californians. Learn what’s really going on and why they agree that protesting is your only chance.
Read the article here.
7 Key Things You Should Know About Homeowner Taxes in Texas
Dig in a little deeper into what your property taxes pay for, how tax rates and appraised values are calculated, important dates to remember, and other helpful information about reducing your tax bill.
Read the blog here.
Texas Property Taxes: Everything You Need to Know About Exemptions
We created another resource page solely about Texas property tax exemptions. You’ll not only learn all about them, but we have additional exemption resources on that page as well if you want to learn even more.