How Texas Property Taxes Are Calculated
Understanding how property taxes are calculated is essential to know how much you will pay for property tax bills when you buy, sell, or own a home in this state. Since local officials determine rates, you will need to look up the specific numbers in your county to get an estimate of the local taxes.
Here are a few of the elements that impact your property tax bill.
Property Appraisals
Every county has its own local appraisal process for evaluating properties and determining tax bills. Usually, these entities implement mass appraisals to group similar properties using common standards and available data. These can be organized by appraisal districts or property types. These mass property appraisals aim to determine the relative home values of all the units within that jurisdiction to create a tax rate that will pay for all the necessary community services.
Local Taxing Units set Tax Rates
There is no state property tax in Texas. That means that the local municipalities levy all property taxes. Usually, rates differ from city to city and county to county, depending on how much money goes to each taxing unit in the area. Local taxing unit budgets can include many segments, such as local school districts, tax adjustments for water codes, hospital districts, and fire prevention districts. Local officials elected by residents are in charge of setting property tax rates, so voters always have a say when it comes to increases in property taxes the local taxing units contract.
Calculating Your Property Tax Bill
Calculating your property tax bill accurately will depend on the local rates. For example, let’s look at the average property tax rate across the state, which is about 1.6%. This is one of the highest average tax rates in the country. Say you own a home that has an appraised value of $250,000. 1.6% of that value is $4,000, so you can expect to pay roughly that amount each year in property taxes.
However, that number has plenty of variation depending on where you live. In Dallas, Texas, you could be paying a property tax rate of 2.22%, which, in the example above, would equal roughly $5,550. In Mills County, your tax rates could be as low as .9%, which would be only $2,250 for a $250,000 home. Usually, homeowners receive their property tax bills once a year. If you have an Escrow account, you pay the annual amount throughout the year, and then it gets taken directly from Escrow once the property taxes are due.
How to Avoid Paying Property Tax in Texas
You are required by law to pay your property tax bill each year. If you do not, you could risk foreclosure and the loss of your home to the government. For buyers and sellers, you will each pay property taxes based on the timing of when the real estate transaction occurs and who owns the home during portions of the tax year. Here are a few ways to avoid paying your home’s full property tax bill.
Homestead Exemptions
Homestead exemptions can reduce the taxable value of your property. The general homestead exemption is available for primary residences in public school districts. Eligible homeowners under this exemption could reduce their property’s taxable value by $100,000, resulting in significant savings each year on the property tax bill. There is also an over-65 exemption of up to $10,000 for many school districts located in Texas, and other taxing units could grant even more. If you are physically disabled, you may also qualify for certain exemptions.
It is important to note that these exemptions are never applied automatically based on where you live. You have to apply to receive them and maintain your eligibility each year.
Other Exemptions
Other Texas exemptions can also reduce your home’s taxable property value and yield significant savings. If you have a solar or wind energy device on your property, you could apply for an exemption to take advantage of your city’s initiatives for green energy usage. Disabled veterans and spouses of disabled veterans may also qualify for certain exemptions on local property taxes. Charitable organizations could reduce their local property tax bill by applying for their own exemptions. If property owners have land used for qualifying timber or agricultural activities, they can also get a favorable appraisal that yields a reduced property tax bill.
Tax Deferrals and Abatements
A tax deferment is a process by which certain property owners can delay paying their property taxes based on particular circumstances. These deferrals are often unpaid until the home is sold or the ownership changes. Seniors, disabled persons, veterans, and family members of veterans may be able to apply for deferments to postpone paying their property taxes.
Tax abatements are another tool usually employed to stimulate economic growth in a specific area. A property tax abatement is an agreement between the taxpayer and the local taxing unit not to tax the increase in value of a property for a certain amount of time, not exceeding ten years. This can incentivize a property owner to invest in improvements to their home.
Appealing Your Property Tax Appraisal
To ensure local taxing units treat taxpayers fairly, there is always an appeal process for property owners to enter if they disagree with assessments of their homes. It may be worth pursuing an appeal if there is inaccurate information in the appraisal record, such as the wrong square footage or incorrect building features. You could also appeal if you believe the valuation is higher than similar properties in the same jurisdiction. A sudden increase in your valuation could also be a reason to appeal.
Typically, you can bring your appeal to an administrative Appraisal Review Board (ARB) hearing if you are unsatisfied with your property valuation. Suppose they are unwilling to consider your case or disagree with your assertion. In that case, bringing your appraisal appeal for judicial review before a local administrative district judge is possible. Although this process could be lengthy, success would mean saving money on your local property tax bill and holding local taxing units accountable for their poor assessments.
Paying Your Texas Property Taxes
Taxing units will usually send property tax bills across Texas in October. Usually, your local property tax amount will be due on January 31st, a few months later. If a payment is not made until February 1st or later, then it is considered delinquent unless you are approved for a deferment.
The penalty for not paying taxes on your property value in time is an additional 6% for the first month of delinquency plus 1% for each additional month afterward. On July 1st, penalties will increase even further. There are several ways to cover property tax collections if you do not have an Escrow account or need more money in your bank account. You can take out a property tax loan through a trusted lender or work out an installment plan with the county’s tax assessor-collector.
How To Get A Fair And Fast Offer For Your Property
Selling your house further complicates the notion of paying property taxes. Since you may only own the home for part of the tax year before paying what is owed to local governments, it adds another layer to buyer negotiations. To get a fair offer on the market value of your home without worrying about property tax negotiations with the buyer, selling your house for fast cash might be the most sensible route.
Selling for cash can save you time and money in many ways. First, you do not have to pay closing costs, including property taxes. Second, you do not have to wait during loan approval or buyer negotiations. Once you grasp fair market values for similar properties, you can take advantage of a quick, all-cash offer from a company like A-List Properties.
You can also reduce tax rates when you sell your home by researching exemptions, deductions, and abatements. These initiatives can impact property, local sales, and capital gains taxes.
If you want the best possible offer for your home in Texas, then taxes are something you have to consider. A cash buyer can get the deal done quickly and help you save time and money to reduce your tax burden at sale.