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Texas has one of the highest property taxes in the country. In fact, Texas ranks 3rd as the state with the highest percentage of property tax based on the property value at (1.81%). That said, Texas is a relatively tax-friendly state even after considering other taxes (such as sales and local taxes) imposed by the state.
So what are property taxes based on in Texas?
This guide will dive into that. We also let you in on how you can reduce property taxes in Texas and the exemptions available to you.
Before we get to what property taxes are based on, why are property taxes so high in Texas?
Property tax is high in Texas because the state does not have a state income tax. Instead, the government relies on property taxes to fund schools, police stations, firefighter stations, service roads, and libraries. In reality, Texas depends more on property tax than most states.
What are Property Taxes Based on in Texas?
Generally, how much property taxes you pay is dependent on the appraised taxable value of your property and the effective tax rate in your county. However, in some instances, property tax can be based on the produce earnings from the property. For example, if you own an agricultural or timberland property, you can apply for a property appraisal based on the earnings you get from the timber or agricultural produce.
Exemptions also play a part in how much taxes you pay. If you’re eligible for certain exemptions, you’ll pay less or no tax at all.
How Does Property Tax Work in Texas?
In Texas, two factors form the foundation of what property taxes are based on. These factors are the home’s appraised value and the county’s set property tax rate. The appraised home value depends on the comparable market value of properties in that area.
On the other hand, the tax rate depends on how much revenue the local taxing units require for public services such as servicing roads, police, and fire stations. Although appraisal districts appraise home value annually, state laws limit how much the taxable home value can rise yearly. For instance, the law limits the taxable home value from rising above 10% when the property is a primary residence of the property owner.
Who’s Involved in The Property Tax Process?
Property taxes in Texas involve four key players:
- Taxpayer
- Appraisal district
- Appraisal review board
- Local taxing units
The Texas laws and tax code establish how each of these key players operates. Let’s look at the role of each stakeholder.
Taxpayer
The taxpayer is the owner of a property, and they have a duty to pay property taxes. However, if the property owner is eligible for exemptions, they may not have an obligation to pay partial or total property taxes. Taxpayers also have the right to protest their tax bill if they feel that the appraised home value is inaccurate. Although the property tax protest process is arduous, it can help you save 3-5% of your annual tax bill.
Appraisal District
The appraisal district is led by the chief appraiser, and it is responsible for appraising home values every year. Typically, the appraisal district’s board of directors appoints the chief appraiser. On the other hand, the local taxing units (school districts, community colleges, etc.) elect the board of directors in the appraisal district.
The Appraisal Review Board (ARB)
This board consists of local citizens in an appraisal district. Their main role is to hear and handle property tax protests.
Local Taxing Units
Local taxing units are the entities that collect property taxes in Texas. These units include school districts, junior colleges, special districts, cities, and counties. The tax rate set by each county depends on the money local taxing units require for public services.
How are Property Taxes Calculated in Texas?
Property taxes in Texas are calculated based on three factors.
Property valuation: The appraisal district appraises your property and assigns the taxable home value. (Amount in dollars which determines how much tax you pay).
The appraisal district looks at the market value to determine the taxable value of your home. Generally, the appraisal district will look at the construction type of property, usage, size, age, neighborhood, structures, and size to determine the appraisal. They will also compare your home with previously sold homes for a more accurate appraisal.
Tax rate: Once the appraisal district appraises the home value, the local taxing units determine the tax rates used to calculate total property tax payable.
Tax exemptions: If you’re eligible for exemptions, the local taxing units will first deduct the exempted amount from the home value before calculating how much property tax you owe.
Exemptions are not automatically deducted. You have to apply for the exemption you’re eligible for before it can be deducted.
Remember, each county has its own tax rate, which hugely influences how much property tax you pay. Let’s say you reside in Yorktown, and your home’s taxable (appraised) value is $345,000. Yorktown’s 2021 tax rate was 0.56%. In this case, you will pay property taxes amounting to:
0.56% x $345,000 = $1931
RELATED: HOW IS TEXAS PROPERTY TAX CALCULATED?
How Can You Lower Your Property Taxes?
As we’ve already mentioned, Texas has some of the highest property taxes in the country. If you’re a property owner in Texas, you will also experience the harsh reality of expensive property tax. Fortunately, you can do a couple of things to lower property taxes.
Review Your Tax Card
Over time, the county’s assessor’s office will collect extensive information about your property. This information is critical in appraising your property. However, most people are not aware that they can request a copy of their tax card to evaluate the information county assessors have about their property. You simply need to get a copy from the county appraiser’s office to review and verify that the information they have is correct.
If the tax card records incorrect information, your property might be overvalued, leading to more property taxes. By pointing out mistakes about the size of your home, improvements, rooms, and fixtures, you can protest the appraised value of your home. This way, you pay a fair property tax based on the real market value of your property.
Renovate and Make Improvements with Caution
Before building new structures or renovating, consider how these improvements affect your home value. For instance, if you add a backyard pool or deck, your home’s value increases. In turn, you also pay more taxes. That’s why you need to be cautious when adding structures. Consider if they will cause an increase in your home value and, consequently, the property taxes. If yes, are you willing and capable of meeting the increased cost of property tax?
Assess the Condition of the Property’s Structures
Your property’s assessed value is inclusive of structures in the property. You need to ensure that assessors are not factoring structures such as sheds or any other damaged building on your property. If such structures are included in the property’s appraised value, you could be paying more tax than necessary.
Claim Property Tax Exemptions
Texas Tax Codes allow eligible property owners exemptions that could lower your tax rates. The appraisal districts usually process exemption applications between January and April before they mail the assessed property value. If you want to benefit from an exemption you’re eligible to, apply early before processing starts.
Here are the exemption options available:
General Homestead Exemption
Texas expects school districts to offer at least $40,000 as of 2022 in property tax exemptions. To be eligible for this exemption, the property under question should be your primary residence. So, if your home is valued at $457,000 and you’re eligible for a $40,000 exemption, the tax rate will apply to $417,000 of your total home value.
Exemptions for Seniors and Disabled Property Owners
If a property owner is 65 years or older, they are eligible for the state-wide exemption. So, on top of the residence exemption, seniors and disabled property owners receive an additional $10,000 exemption from school districts.
Veteran Tax Exemption
According to Tax Code Section 11.131, a disabled veteran with 100% disability status is eligible for total property tax exemption. Section 11.132. allows a partial exemption for residential homesteads donated to disabled veterans by charity organizations.
In addition, Section 11.133 allows a surviving spouse of a US armed service personnel killed in action to receive a total property tax exemption. However, the spouse should not have remarried.
Finally, Section 11.22 cites that armed forces veterans can also qualify for a total exemption and sometimes a partial one. For instance, disabled veterans can apply for partial exemptions of the property they own. On the other hand, spouses and children of a deceased veteran might also be eligible for partial property tax exemption.
Temporary Exemption
If your property experiences disaster and damage is at least 15% of the improvement value of the damaged structure, you’re eligible for a temporary exemption.
Protesting Your Property Taxes in Texas
Why should you protest property taxes?
If your property’s appraised value is inaccurate, you can appeal to have your property valued correctly. Protesting property taxes in Texas will ensure that you pay accurate property taxes. In addition, if you successfully protest taxes, your property tax payments will be lower in the successive years.
RELATED: WHY PROTEST YOUR PROPERTY TAX IN TEXAS
How Do You Protest Your Property Taxes in Texas?
If the appraisal office appraises your property at a higher value than the previous year, they have to send you a notice before May 1 or April 1. From here, you can perform an analysis of your home’s value to determine if the district’s home value appraisal is correct.
A custom appraisal might mean comparing your property with similar homes in your area or using online listings and property surveys. But if you want a more accurate and evidence-based appraisal, you can hire a professional property appraiser.
If your custom assessment finds that the district appraiser valued your home for more than it’s worth, you can protest to have your home’s value lowered, which results in a lower tax bill.
- First, submit your notice of protest to the appraisal review board(ARB) with form 50-132. Make sure to include all your supporting documents such as appraisal reports, photos, etc.
- The review board will notify you of the formal hearing, including the date, time, and location. The ARB will also give you the option to have an informal hearing before it’s escalated to a formal hearing.
- If you decide to go with the formal hearing, the board will listen to your side of the protest and the side of the chief appraiser. This is why you need to have strong evidence in the form of your property details, property market analysis, comparable home analysis, and reports from a professional appraiser.
- Then the ARB will pass its ruling based on the evidence brought forth. If they rule in your favor, the ARB will adjust your home’s value and send a new notice reflecting these changes.
- If you’re not satisfied with the ruling, you can appeal to the district court or appeal the ARB’s decision to the State Office of Administrative Hearing(SOAH).
A small mistake such as forgetting to include all the required documents can see you losing the tax protest case. That’s why you should consider working with a professional tax consultant. This way, you will avail all needed documents at the right time, and terminate the risk of missing deadlines.
Get a Professional to Help with Your Property Tax Protest
Now that we have answered your question, “what are property taxes based on?” are you paying more taxes than you should be?
If yes, working with a tax expert can help you protest property taxes so you can pay what’s fair. Protesting on your own is also an option, but it is time-intensive and can drag on for months.
As professional tax experts, Home Tax Shield has helped hundreds of Texan property owners save thousands of dollars in property tax. With sophisticated technology and years of experience, we’ll represent you throughout the entire process. We can help turn the tax protest process from a frustrating event to a simple, streamlined process that shields you from hefty property tax bills.
Sign up today to start lowering your property tax bill.