Most homeowners don’t have an extra $4,000 to put down on property taxes yearly, but that’s the situation many Texans face. On average, homeowners are paying $3,797 for annual property tax bills, and—at an average effective tax rate of 1.6%—Texas homeowners are paying 61% more than across the rest of the country. But it’s not just the percentage that’s hurting homeowners’ budgets.
The rising property values that cities and counties face also play a pivotal role in the meteoric rise of property tax bills. But Texas legislators are well aware of the problem, and the House and the Senate have approved different packages to resolve it. While the details of those bills are reaching a compromise in committee later this year, homeowners still have to make do with the current property tax situation.
In this article, we’ll discuss the situation for three groups directly affected by the issue—homeowners, renters, and non-homeowner prospective homeowners—and the limited measures to help bring tax relief. Then we’ll explore the details of what state legislators have proposed, the different impacts those changes might have, and how you can take action to pay fair taxes in the present.
The Situation Is Dire: The State of Property Taxes for Texan Residents
Many homeowners saw an unprecedented increase in residential appraisals during 2021 and 2022. In a single year, Travis County residents saw an increase of up to 53%, and Dallas County residents saw a 24% increase.
While this was great news for residents who saw an opportunity to sell their homes (while county appraisal numbers have nothing to do with sales negotiations, they do reflect trends in the market), it was devastating to homeowners trying to hold on during COVID-19 restrictions, uncertain job futures, and turbulent market conditions.
Hot real estate markets, for those not actively participating in the market, led to sharp increases in property taxes and little to no negotiating room with county appraisers. People trying to buy homes during the worst of the spike watched themselves get priced out of the market in a matter of months.
Related: Understanding Your Texas Property Tax Bill
While that sharp, steep incline has dulled a bit, it’s still a seller’s market, and prices continue to increase. The Texas Real Estate Research Center found that the median house price is $319,995 (an increase of 2.1% from last year). The real estate market factors into how county appraisal districts calculate assessed home values because one of the many data points used are “comps,” or the value of recently sold comparable properties, to gauge your home’s market value. Property taxes will increase even if property tax percentage rates stay the same.
Here’s how that impacts the three key groups we mentioned: homeowners, renters, and potential homebuyers.
Homeowners
Even if you want to stay put and have no interest in putting your home on the market, recent house purchases in your neighborhood will bump up your appraisal value. And, even as the market veers toward piping hot instead of burning hot, the after-effects of the last couple of years will continue.
Renters
Renters don’t directly pay property taxes because they don’t own the property. However, residential property owners with tenants must pass on at least a portion of the increased property tax bill. This comes in the form of increased rental rates. Also, because landlords face these higher costs directly, they’ll be more selective than ever in choosing their tenants so they can get reliable rental income.
Prospective Homeowners
Many people who have browsed homes in their area already know what these trends mean for their home search: homes are more expensive to buy, unattainable, and more costly to pay ongoing property tax payments. This forces many people to look in other communities, stay in a home they’ve outgrown, or continue renting.
Two Core Processes for Securing Property Tax Relief in Texas
However, there are some legally established courses of action homeowners can take to seek property tax relief in Texas. If you’re a residential property owner, you can lower your property tax bill by filing for exemptions (which omit part of your property’s value from property tax calculations) or protest your appraisal amount (which is your opportunity to argue down the assessed value to a number you think is fairer). Let’s take a closer look:
Filing for Exemptions
Qualifying homeowners can file for specific exemptions that lower their effective tax rate by excluding a portion of the property’s value from specific tax levy calculations. For example, a homeowner with a homestead exemption will have $40,000 of the home’s assessed value exempted from school district levies.
Since the median home price is $319,995 and many school district taxes hover above the 1% mark, that means a savings of at least $400 on a $5,119.92—a savings of nearly 8%. Homestead exemptions also cap potential assessment value increases at 10% for market-based increases.
Qualifying seniors and disabled homeowners can see an additional exemption of $10,000. Texas offers multiple exemptions, but it’s the responsibility of property owners to research them, determine if they qualify, and file the paperwork. Also, most exemptions are solely for homeowners with a primary residence in Texas. Tenants and landlords won’t see much value here.
Filing a Protest Regarding the Appraised Value of Your Home
Property owners—primary residence homeowners and residential property investors alike—can protest their assessed property value every spring. You can take action if it’s far too high, doesn’t consider your property’s unique profile, or seems to have been based on bad comps that don’t seem comparable.
This process can be complicated, as you will need to file your protest form, provide a counteroffer and supporting documentation to support your protest, and manage ongoing communications with the appraisal district. You may even be requested to attend a hearing in front of an appraisal review board (ARB) to make your arguments. However, you can hire a service to manage this process for you.
Related: Understanding the 10% Homestead Exemption Cap
Anticipated Changes in Property Tax Relief Laws in Texas
The House and Senate have proposed and passed tax packages directly addressing property taxes. While these packages are extensive and include multiple different funding provisions and allowances, they mostly boil down to these two approaches:
- The House wants to reduce the cap on homestead-exempted properties to 5%. This will stabilize tax increases for homeowners. They want to put $12 billion into school funding to make up for the shortfall.
- The Senate wants to increase the homestead exemption from $40,000 to $70,000 and nudge the over-65 exemption from $10,000 to $20,000. This will also help stabilize payments (especially for senior homeowners on fixed incomes). They address the anticipated school budget gap of $5.38 billion.
3 Factors Affecting Property Tax Considerations
Now that you know the crux of the two bills, you can weigh the two general approaches by five key factors lawmakers considered.
Increased Population from Out-of-State Employers and Employees
Texas is growing, and this is generally good news. Companies from across the country are moving to Texas, and while many employees are carrying with them, new jobs will be opening up. However, this is continuing to drive up demand for homes in Texas. Construction and supply delays lingering from the pandemic are also squeezing available inventory. So whatever plan reaches the ballot needs to address how home prices keep going up.
Aging Population (Especially With a Fixed Income)
In 2020, approximately 2,290,000 homeowners were over 65 years old, or roughly 23% of Texas’s over 10 million homes. Many of these homeowners are on fixed incomes during retirement. Skyrocketing house prices, property values, and property taxes are not in their budgets. Legislators must act so older homeowners aren’t priced out and disrupted.
Current Texas Revenue Excess
Texas’s budget surplus for 2023 is approximately $32.7 billion. Both tax packages address how that surplus can fund schools and deliver a tax break to property owners. However, many legislators on both sides (and in both chambers) worry about relying too much on the current surplus for multi-year structural tax changes, as schools could face funding shortages if the surplus drops next year.
Stay on Top of Your Property Taxes With Help From Home Tax Shield
All Texas residents are impacted by the amount of revenue collected through property taxes, whether you own a Texas property as a primary residence or as an investment. The recent measures approved by the House and Senate are primarily designed to provide tax breaks for qualifying homeowners who live in the home. However, every residential property has—and will continue to have—the right to protest its property values each spring. If you want to get the process started, sign up today with Home Tax Shield. We can assess the value of your property and manage the property tax protest process on your behalf.