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You and your neighbors have similar properties. They feed into the same schools, you pay your dues to the same HOA, and even your landscaping and lawns complement each other. Since day-to-day maintenance costs and maybe even your insurance premiums are so similar, you’d expect to see similar numbers on your property tax bill.
But you and your neighbors happen to chat about the recent tax increases — caused by myriad factors like booming demand for houses, a new school stadium, and a new infrastructure project — but they mention a tax bill that is substantially lower than yours. Rather than just a one hundred dollar difference, there’s a difference of a thousand or even a few thousand dollars. Understanding how the county calculates your tax bill and what options you have to reduce your tax obligations can help you save money this year and in years to come.
Keep reading to learn how property taxes are calculated, some key factors that change property taxes from year to year or property to property, and what might make your tax bill much higher than your next-door neighbor’s. You’ll also learn how to protest property taxes and why it’s a critical tax reduction strategy for homeowners.
How Are Property Taxes Calculated?
Property taxes are calculated based on your home’s appraised or assessed value. This isn’t the same appraisal your home will go through when you put it on the market. Instead, a county assessor or a team member will often use software to calculate your home’s assessed value based on previous years’ values, the value of surrounding homes, and any known factors that can increase or decrease the final amount. Assessors will reevaluate your property every one to five years.
Once that property value is known, your county will calculate the total taxes due as a percentage of that value. The percentage, called the mill levy or millage tax, is comprised of all the individual tax levies that impact your property. For example, a few of these levies might include:
- School district levy
- City levy
- County levy
These levies are then added up to a final percentage due. In Texas, according to SmartAsset, “the average effective property tax rate in the Lone Star State is 1.69%. Compare that to the national average, which currently stands at 1.07%. The typical Texas homeowner pays $3,390 annually in property taxes.” So if your property is assessed at $350,000 and you pay the average tax percentage in Texas, your bill will be $5,915.
Keep in mind that these numbers are averages. Based on your county, the school districts and water systems your property is affiliated with, and your city, that percentage will change. Your total due will also vary based on how much the assessor determines your home is worth.
The short video below offers more information on how your property tax is calculated.
Related: What Is a Property Tax Appraisal, and What Does It Mean?
Factors That Can Affect Your Property Tax Bill
Knowing the mechanics of how assessors calculate your property bill helps you understand how the county arrived at the two different numbers: your assessed property value and your millage tax. But let’s take a deeper look at the factors that can change those numbers.
Geographic Factors
Your millage tax may change based on these individual factors:
- If you live in a city or unincorporated land
- The city and school district your property is tied to
Geographic factors can also impact your property’s assessed value. For example, you may have a higher or lower assessment based on:
- Proximity to power lines (lower)
- Being adjacent to undesirable locations (water treatment stations, cemeteries, industrial buildings, etc.) (lower)
- Proximity to desirable amenities such as schools, parks, and office parks (higher)
While these factors can weigh in on your property’s assessed value, they will be indirectly reflected by the historical value and that of your neighbors’ properties.
Individual Property Factors
Slight variations between properties can also significantly impact your final tax bill by affecting the property’s assessed value. Some common factors are:
- Swimming pools
- Additional structures
- Agricultural exemptions
- Age or size of the property
- Parcel/Lot size
All these factors and more contribute to the assessed value of your property and what levies you’re responsible for paying.
7 Reasons Why Your Property Taxes Are Higher Than Your Neighbors
It may seem like many of these factors won’t vary between you and your neighbors’ properties. After all, you’re unlikely to have a county line right between you and your neighbor’s house, and most neighborhoods feature homes built roughly simultaneously. Let’s take a closer look at seven specific factors that could make your 2022 property tax bill much higher than your neighbor’s.
1. Your Property Is Bigger
Most neighborhoods have a combination of two-story and one-story houses. Depending on your region, you may also have a basement while your neighbor only has a crawlspace. You may have a two- or three-car garage compared to a neighbor’s one-car garage. These differences contribute to your home being bigger and, therefore, more valuable on paper.
Besides your bigger house, your actual property may also be more extensive. If you have a corner lot or a more favorable position rounding a culdesac, your lot size may range from 500 to a few thousand square feet. Property assessments are split into two main categories — the structures and the land — so these factors matter.
2. Your Property Is Newer
While most modern neighborhoods have homes built approximately the same time, that’s not always the case. Older neighborhoods can have homes with a twenty-year difference while looking largely similar. If you live in a newer development, a brand new build compared to a home built just in 2015 may be regarded as more valuable.
When your county assessor looks at your property (or if you contest your property taxes), it’s essential to look at comparable properties, or “comps,” that are the same age as your property.
3. Your Property Has More Features or Updates
Even if your home has the same basic layout, size, and age as your neighbor’s house, any updates you’ve made over the years will be a factor. So will any indoor and outdoor features you have that your neighbor doesn’t. For example, having an outdoor pool can drastically raise the assessed value of your property, as can a full-featured outdoor living space, a completed remodeled basement, and other interior and exterior upgrades.
5. Location, Location, Location!
Just because you and your neighbor live side by side or across the street from one another doesn’t mean your locations are identical. Being directly up against drainage, power lines, a cemetery, and other features can affect the property’s value over time. Depending on how the county assessor assesses the property, this can be a significant factor. The sales evaluation method, for example, relies heavily on the sales price the property is likely to get; if your neighbor lives right against a cemetery or has cumbersome easements, their property will sell for lower than yours.
Related: Is Hiring a Texas Property Tax Protest Company Right for You?
6. Your Property Doesn’t Have a Homestead Exemption
A homestead exemption reduces the total tax obligation you have. For example, a homestead exemption in Texas grants you a $40,000 exemption; that $350,000 house would be taxed as if it were $310,000 instead. Another benefit of a homestead exemption is that it limits the amount taxes can be increased yearly to 10%. If you haven’t filed for an exemption, your tax bill will automatically be $676 ($40,000 * 1.69%) higher than your neighbor’s on average. There’s also nothing protecting you from high tax rate hikes over the years.
7. You Didn’t Protest Your Property Taxes This Year (or At All!)
Protesting your property taxes is a valuable strategy for making your tax bill more reasonable. Assessors may have raised your property taxes based on general assumptions about your neighborhood that you don’t think hold for your home. Also, some of those factors we discussed as reasons why your neighbor’s property tax bill may be lower (smaller house, unpopular easements, age, etc.) apply to your property but aren’t considered in your property assessment. You can argue down your market value and lower your property tax obligations by protesting your property taxes.
Protesting your property taxes becomes even more valuable if you do it consistently throughout the years. Every time you argue down your property’s market value, you are lowering the base rate that assessors use the next year to calculate the new (generally higher) value. Annually protesting can dramatically affect your tax bills, especially if you also file a homestead exemption that caps the potential increase. This strategy may be why your neighbor is paying less in property taxes than you are.
Take Protesting Property Taxes Off Your To-Do List With Help From Home Tax Shield
If you feel your property taxes are unfairly higher than your neighbor’s, or you think they should be lower for any reason, it’s time to start protesting your property taxes. Even minor reductions and a residential homestead exemption can help keep your property tax bill manageable.
At Home Tax Shield, we’re here to help by taking on the tedious process of filing a protest form, meeting with county assessors and their representatives, and representing you at meetings and hearings. Sign up today to start seeing how low your property taxes can go.