Texas ranks among the U.S. states with the highest property taxes with an average effective rate of 1.60%, well above the national average of 0.99%. The sharp spike in Texas property taxes is mainly because the Lone Star State doesn’t collect income tax and relies heavily on property taxes to fund public services.
Like many Texans, you’re probably tired of the ever-rising property taxes. However, you can maintain balance and fairness by exercising your right to protest your taxes with the chance to lower your tax burden. To keep your taxes in control, check out the key steps and strategies for successfully winning your protest.
Factors Involved in Texas Property Tax Calculations
Texas property tax is influenced by an array of factors, including property values, tax rates, exemptions, and assessment methods. Let’s take a closer look at the major influences.
Property Value
Property value plays a central role in determining property taxes in Texas. Tax Code Section 25.15 mandates the County Appraisal Districts (CAD) to reappraise residential properties once every three years. The state uses the appraised value of a home to levy property taxes. For instance, if your total tax rate is 1.60% and your appraised home value is $200,000, you will owe the state $3,200 in annual property taxes.
Tax Rates
Tax rates in the Lone Star State vary based on specific local government entities encompassing counties, cities, and districts. Each entity sets its own tax rate to generate revenue for public services like infrastructure, schools, and law enforcement. This means local government budgets and spending priorities influence property tax rates, and the rates may be adjusted annually to accommodate changes in local funding needs.
Exemptions
Homeowners may qualify for various exemptions and deductions that can lower Texas property taxes. Among the most popular exemptions is the homestead tax exemption, available to homeowners living in their primary residence. This exemption deducts $100,000 of a property’s value from taxation. Note that only school districts can offer the exemption. As an example, if your home is worth $300,000 and you qualify for the homestead exemption, your school district will only tax $200,000 of your home’s value.
Related: A Guide to Maximizing Homestead Exemption and Cap Benefits
If you are at least 65 or living with a disability, you can claim an additional exemption of $10,000 under the age 65 or older and disabled exemptions. Like the homestead exemption, only school districts can offer these exemptions. Other common exemptions include:
- Disabled veteran exemption
- Agricultural or Open-Space Exemption
- Historical Exemption
- Charitable Organization Exemption
Assessment Practices
The assessment practices used by local appraisal districts can also affect Texas property taxes. These practices include methods for determining property values, such as market value or income-based approaches.
The market value method involves assessing a property’s worth based on its market value, determined by analyzing comparable sales data of similar properties in a locality. Appraisers consider location, size, condition, and recent sales to accurately evaluate. However, fluctuations in the real estate market and variations in property characteristics can sometimes complicate this process.
The income-based approach evaluates a property’s income potential by analyzing its rental income, operating expenses, vacancy rates, and other relevant financial data. Assessing the property’s income-producing capabilities helps appraisers derive a valuation that reflects its earning capacity.
A third method, the cost approach, values property by estimating the cost to rebuild it today. This includes factoring in depreciation for wear, outdated features, and functionality. While useful for unique properties lacking sales data, it relies on precise replacement cost estimates and may not perfectly capture market value.
Why You Should Consider a Property Tax Protest in Texas
A fair and accurate property appraisal is crucial to avoid paying more than the property’s true value. Unfortunately, there are times when the appraised property value is significantly inflated. Typically, your Central Appraisal District uses a mass appraisal technique to determine the value of your home. Appraisal districts rarely have adequate staff and resources to appraise each home individually, which is why expedited methods are employed.
Under the mass appraisal system, similar property values are used to appraise an entire residential area. Such a blanket appraisal system often results in overgeneralization and failure to account for unique home characteristics that could help lower its value and reduce taxes.
Additionally, disparities may arise due to changes in market conditions and dynamics not captured by the mass appraisal approach. Consequently, if you don’t agree with the appraised value of your home, it’s beneficial to file a protest with your Central Appraisal District.
4 Crucial Steps to Effectively Protest Your Texas Property Taxes
Texas law requires each appraisal district to appraise all property at market value as of January 1st. Appraisal districts send a notice of appraised value to property owners in April or May following the appraisal process.
The notice carries information like square footage, assessed value, and other details about your home. As mentioned earlier, you have a right to appeal your appraisal district’s finding if you disagree with your home’s appraised value. Below are the steps to protest and try to lower your property taxes.
Step 1: File a Notice of Protest
The first step to protest the appraised value of your property involves submitting a completed Notice of Protest Form (Form 50-132) to your county’s Appraisal Review Board (ARB). Attach any supporting materials, such as appraised discrepancies, property condition, market trends, expert opinions, and documentation of damage. The deadline for protesting Texas property taxes is either May 15th or within 30 days of receiving the appraisal letter, whichever comes later.
Remember that the 30-day countdown starts once the district mails your appraisal letter, not when you receive it. Failing to meet this deadline could forfeit your opportunity to protest your property’s taxable value.
Step 2: Attend the Informal Meeting with ARB
After filing your Notice of Protest, you’ll be invited to an informal meeting with the appraisal staffer and the ARB. This meeting allows the appraisal staff to review your property value. Provide any relevant documentation, such as valuation comparisons, repair estimates, photos, and other records that could indicate your home’s value is overstated. After the review, the district may offer a reduced value. You can continue your appeal through the formal review process if you disagree with the new value.
Step 3: Attend a Formal Hearing with ARB
During your formal hearing, you’ll get an opportunity to provide your testimony under oath and present evidence supporting that your home is overvalued. You’ll also be allowed to provide a specific value you believe is accurate.
Related: Tax Protest Strategies: How to Lower Your Property Taxes Effectively
On the other side, the appraisal district will argue their case and provide evidence that refutes your claim. Once both sides make closing statements, the ARB panel deliberates on the evidence presented and issues their verdict and recommendation of a final value to the full Appraisal Review Board for final approval.
Step 4: Appeal ARB Decision to the Binding Arbitration
If you are dissatisfied with the ARB decision, you can find further relief by appealing through Binding Arbitration. During the hearing, a neutral arbitrator hears and examines the facts of an appeal and makes a decision that binds both parties.
Tips for Successfully Winning Your Protest
While not all protests result in a lower appraisal, they cannot result in a higher appraisal—and there are tips you can follow to improve your chances of success. Here are some helpful strategies when protesting your Texas property tax.
Be Mindful of Deadlines
Property tax bills are typically mailed out around October each year. It’s important to file a protest against discrepancies related to your home appraisals before the protest deadline. Once you receive the Notice of Appraised Value in April or May, you have until May 15th to file a protest (or 30 days after receiving the notice).
Prepare Well for Your Hearings
After receiving the written notice inviting you to the informal and formal hearings, do your homework. Collect all the necessary evidence and documentation needed for a successful appeal. Some compelling evidence to prove your home is overvalued includes:
- Blueprints and architectural drawings
- Assessments of similar properties
- Reports from independent appraisers and contractors
- Engineering reports
- Receipts or estimates of repairs
- Photographs of your property
- Property surveys
- Deed records
Be Cautious with Appraisal District Adjustments
Adjustments to property appraisals are typically minor additions or subtractions from the values of comparable properties. These adjustments aim to reflect shifts in demand influenced by external and internal factors. However, adjustments made by appraisal districts may not always be considered suitable and can be subject to challenge. Discuss with the appraisal district to understand the methodology behind each adjustment and the rationale supporting it.
Don’t Talk About Property Taxes
During your hearing, stay focused and avoid mentioning property taxes. Keep in mind the hearing is about the property appraisal value and not the tax bill. Mentioning Texas property tax may give the ARB the impression you are appealing for the wrong reasons. With this in mind, identify crucial areas of your protest and avoid any unnecessary deviation. It’s also advisable to prepare a response to the appraisal district’s evidence.
Get Professional Help From Tax Experts
For your best chance at success, seek the help of a professional property tax consultant. Texas property tax experts can streamline the process and help you prepare adequately for the protest. Using data science, AI tools, and their expertise, they can accurately assess your property and identify any discrepancies or errors in the evaluation process.
In addition, they can assist you in gathering all necessary documents to strengthen your argument and increase the likelihood of a successful outcome. Best of all, the consultant can represent you during hearings. Their presence can lend credibility to your case and ensure your interests are effectively communicated and defended.
Streamline Your Texas Property Tax Protest Every Year
Protesting your property taxes in Texas is never a walk in the park. You must gather evidence supporting your claim, navigate several bureaucratic procedures, watch out for crucial deadlines, and attend hearings to plead your case. Hiring the right property tax experts can significantly ease the burden and increase your chances of success.
At Home Tax Shield, we help homeowners across Texas navigate the entire protest process. Our experienced tax professionals leverage the power of data science and AI to craft compelling arguments and present evidence that maximizes your chances of a favorable outcome. Sign up today, and we’ll protest every year on your behalf so you can better control your property tax burden.