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A property tax appraisal is a process that determines the value of a piece of real estate for taxation purposes. Once the tax value of your property is established, any exemptions that you qualify for and your property tax rate will be used to calculate your property tax bill.
When you receive a notice informing you that your property taxes have been reassessed, it’s typical to wonder, what is a property tax assessment? Section 25.18 of the Texas Tax Code requires every county appraisal district to reappraise property values at least once every three years.
Here’s what you need to know about property tax assessments, including your options for disputing the assessment and the impact the assessment will have on your finances.
What is a Property Tax Appraisal?
Every U.S. state requires property owners to pay property taxes; however, in some states, including Texas, the state doesn’t dictate the property tax rate. Instead, each district uses its own methods for administering and assessing property taxes. They conduct an assessment to determine how much property taxes the property owner must pay using district-specific information regarding tax rates and exemptions. Let’s look at the different elements of this process.
The Calculation of the Property Tax Appraisal
The property tax assessment uses the property’s current market value as its tax appraisal value. According to Tax Code Section 23.01, taxable properties should be appraised at the market value as of January 1.
A property’s market value is the price that the property would sell for if it were listed for sale. This is the value that the home would sell for within a reasonable time frame.
Several factors may impact the property appraisal, and a few different methods are used to calculate the property’s market value.
If comparable properties have recently sold, data from these sales will be used to appraise other similar properties. This is known as the market approach to value.
Other districts use a method known as the income approach. This method seeks to calculate what an investor would pay for the property in anticipation of receiving an anticipated revenue stream. The price that the investor would be willing to pay is used for the property appraisal.
A third method utilized by districts is known as the cost approach. This is the amount it would cost to replace the property with an equal replacement. Depreciation and the land value are factored in with this method.
Exemptions
Exemptions can be used to decrease a property’s taxable value. Partial exemptions reduce the appraised value by a percentage of the property’s value, while a total exemption excludes the property’s entire value from taxation.
In Texas, some of the exemptions that impact a property tax assessment include:
- Residence Homestead Exemption
- Inherited Residence Homestead Exemption
- Additional Homestead Exemption for Ages 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
It’s permissible for homeowners to use multiple exemptions at once to lower their property’s assessed value.
Exemptions may also limit how much your assessed property value can increase per year. For example, if your home qualifies for a Residence Homestead Exemption, the assessed value of your home may not increase by more than 10 percent in one year (even if the market value is estimated to be higher).
The Property Tax Rate
A third element that will impact a homeowner’s property tax bill, but doesn’t change the property’s appraised value, is the district’s property tax rate. The property tax rate is applied to the home’s appraised value (less any exemptions) to determine the property tax bill.
Related: How is Texas Property Tax Calculated?
The Impact of a Property Tax Appraisal
When a property tax assessment increases a home’s appraised value, this has lasting consequences for both the homeowner and the neighborhood in which that home is located.
Many people who are confused about what a property tax appraisal is don’t know they can take action, or they simply choose not to take action, even if they disagree with the assessment. This inaction eventually impacts other homeowners in the neighborhood as well.
How Does a Property Tax Appraisal Impact the Homeowner?
A homeowner who receives a higher property tax assessment has less money to spend on their other financial obligations. An increase in a property tax bill by a couple of hundred dollars might not seem like a huge increase, but if this increase happens every few years, this can seriously erode the money that the property owner has to spend on other bills and responsibilities.
One way to keep this in check is by protesting your property tax bill if you feel it’s incorrect or unfair. If it seems too complicated or intimidating to you, know that you’re not alone. The good news is that you can hire property tax professionals to do this for you.
How Does a Property Tax Appraisal Impact the Neighborhood?
The property owner with a higher property tax assessment isn’t the only one affected by the higher appraised values. Eventually, the increase in the assessed value will affect the other appraised property values in the neighborhood. This means that the whole neighborhood can see an increase in their appraised property values and property tax bills.
What are Your Options If You Disagree with the Appraised Value of Your Home?
If you disagree with your home’s assessed property value, you have the right to protest the district’s appraisal value. You can do this yourself, or as mentioned earlier, you can hire property tax professionals for a stress-free process with a higher chance of success.
How Do You Protest a Property Tax Appraisal?
You’ll submit your initial protest to the appraisal review board (ARB). You have until May 15 or 30 days after the date of the appraisal notice (whichever is later) to file Form 50-132, a Notice of Protest, with the ARB.
Once your protest is filed, you’ll receive a notice that provides you with information about your formal hearing with the ARB (such as the date, time, subject matter, and place).
During the hearing, the ARB will hear from you and the chief appraiser regarding the value of your property.
Depending on the district, there may be an informal hearing where the ARB reviews your protest and documentation to address your concerns prior to an official hearing.
What Documentation Do You Need to Protest Your Appraised Value?
The documentation that you need to protest your property tax appraisal depends on why you’re protesting the assessed value. If you believe that the information used to value your home is incorrect, you can submit documentation that provides accurate details about your property.
Or, if you believe that the comparable properties used to appraise your property value aren’t actually comparable to your property, you can gather the sales information from properties that you believe are more similar to yours.
Perhaps you believe you qualify for an exemption that was denied. You’ll need to gather the documentation that demonstrates you are eligible for the exemption. For example, if you’re denied the residency exemption, you might gather a utility bill and a voter registration card to prove that the home is your primary residence.
What If You Disagree with the ARB’s Decision?
If you aren’t satisfied with the ARB’s decision, you have the right to appeal their findings. Who you appeal to will depend on your property’s county.
You may need to appeal their findings to your county’s state district court, the State Office of Administrative Hearings (SOAH), or an independent arbitrator.
Another option is to appeal the ARB’s decision through binding arbitration. This alternative is available for any residential homestead or other properties with appraised values of $5 million or less.
Related: Texas Property Tax Protest Evidence and Process
What If You Need Help Protesting Your Property Tax Assessment?
If you feel overwhelmed trying to understand what a property tax assessment is, or simply don’t have the time to invest in going through the process, figuring out documentation, preparing your argument, etc., the thought of appealing your tax appraisal may feel daunting. As we’ve mentioned, you can hire a professional company to appeal your home’s assessed value for you.
Advantages of Using a Professional Service
Numerous benefits are associated with using a professional service to dispute your property tax appraisal.
A professional service has extensive experience handling property tax appeals and knows the kind of documentation you need to argue that your home is overvalued. They know what properties are truly comparable to your home and can gather the necessary documentation to prove that your assessment overvalues your home.
Many services can also provide representation on your behalf at your formal hearings and other required appearances.
Get a Fair Tax Value Every Year
If you disagree with the results of your property tax appraisal, you don’t have to go through the appeals process alone. Home Tax Shield is here to help.
Home Tax Shield uses sophisticated data science, reliable information, and innovative technology to dispute the value of your home. We’ll even provide you with an experienced advocate to provide representation at your protest hearing. You can rest assured that you’re paying a reasonable amount for property taxes and keeping more of your own money in your pockets each year.
Ready to get a fair tax value every year? Sign up today to get started!