Property taxes are no trick or treat! Nobody likes paying taxes. Ben Franklin famously said: in this world nothing can be said to be certain, except death and taxes.
Property taxes are a different ball game though. They are an inalienable part of homeownership. Property taxes are the primary source of revenue for school districts, municipal utility districts (road, sewage, water et. al. ), parks, community colleges, hospital districts etc. According to a study by the Tax Foundation In fiscal year 2019, property taxes comprised 31 percent of total state and local tax collections in the United States, more than any other source of tax revenue. In that same year, property taxes accounted for 72 percent of local tax collections and 27 percent of overall local government revenue. Clearly, property taxes are the lifeline of a community.
However, that doesn't mean you can't do anything about your property tax. Here is how to lower taxes on your home.
Since property taxes are ad valorem, property taxes trace an upward trend in a booming real estate market. That being said, no homeowner should pay more than their fair share of property tax. Texas constitution and the Texas Tax Code provide homeowners several means to ensure fairness and equity in taxation. Let's explore.
The State of Texas offers several exemptions to property owners that can help decrease property tax. Exemptions are based on who owns the property and how the property is used.
First and foremost, homeowners must claim their general residence homestead exemption. Filing exemption applications is easy and free. Do not pay anyone for this! Most counties now offer online applications. They are simple and take a just a few minutes.
School districts offer a $100,000 homestead exemption. Other taxing units are bound to give a residence homestead exemption of at least $5,000.
If you are a senior (65 years or older), then school districts have to offer you an additional $10,000 exemption. Other taxing units have to offer a minimum exemption of $3,000. Same exemption applies even if you are disabled.
If you have solar or wind energy devices, you are eligible for solar property tax exemption.
If you are eligible for any tax exemptions, ensure that the qualifying exemption is listed on your Notice of Appraised Value. If not, file the exemptions with your county to lower your property taxes.
Search for your property on the appraisal district website and thoroughly review your property descriptions. Ensure they are accurate. This is one of the easiest ways to lower property taxes. The appraisal district may have recorded your home’s data incorrectly. Check if your land and building square footage, number of bedrooms, bathrooms, garages, porch, canopy and other features listed in your notice are accurate. It is not uncommon for appraisal districts to have outdated property information. In one instance, the approved permit mentioned two half baths. But, there was only one half bath in the house. Pointing these out to your county appraisers is assured to reduce your home's assessed value.
Property you own, like anything tangible, undergoes wear and tear. Your home requires repairs once every few years. Can you lower your property taxes using this? Absolutely! If your property needs repairs, then your market value gets reduced. Get 3 bids from contractors to determine repair costs. Take pictures of particular areas that are in need of repair as evidence. Attach them along with your online protest application. Or enclose them with your physical protest form. Your appraisal district can reduce your appraised value based on this.
Properties are assessed as on January 1st each year. i.e. your appraised value is the value the county thinks your property would have sold for in the open market on January 1st. Since Texas is a non-disclosure state, appraisal districts are forced to purchase sales price information from vendors. They also obtain construction cost data from such data providers. Appraisal districts then use a Computer Assisted Mass Appraisal System to appraise a class of properties en-masse in a given neighborhood. Hence, appraised values can be askew.
Get in touch with your realtor and request them for comparable sales in your neighborhood. If you have been their client they will generally get you the sales comps for free. Even otherwise, most realtors will be happy to help you. They have access to comparable sales via MLS system. Remember, appraisal districts do not have access to sales data, but realtors do!
Though you can use any sales from Jan 1st of the previous year till March 31st of the current year, it is better to stick to a +/- 90 day window from Jan 1st of the current year.
Once you get the comps, find their adjusted median sales price. If it is lesser than your assessed value, you stand a good chance of reducing your property tax. e.g., if your house is 10 years old, 2,000 sq.ft. with 3 bed, 2 bath and a garage, try to find properties which have sold between October 1st and March 31st with the exact same characteristics, but were appraised lower. If not, then find the closest matches and adjust those comps to arrive an adjusted value for each comp. Calculate the median of such comps, and you arrive at your opinion of appraised value.
Article 8(a) of the Texas Constitution lays out that taxation shall be equal and uniform. Section 42.26(a)(3) of the Texas Property Tax Code explicitly provides relief to homeowners for unequal appraisal. The district court shall grant relief on the ground that a property is appraised unequally if the appraised value of the property exceeds the median appraised value of a reasonable number of comparable properties appropriately adjusted.
Identify comparable properties in your neighborhood that are assessed lower than yours. By picking appropriate comps, you can arrive at an adjusted median value of the comps, that is lesser than yours. This is a sure shot way to reduce your property's appraised value and in effect your property tax.
Have trouble finding comps for you house? Don't sweat. Enter your address and find out your savings for yourself!
County appraisers may periodically inspect properties. If an assessor arrives in your neighborhood, it may be a good idea to walk them around your property and show them any visible damages e.g. a cracked foundation, leaking roof or mold on the walls. These damages directly lower your home's sale price and hence the appraiser will be favorably inclined to reduce the appraised value by that extent.
Texas grants every property owner the right to protest their appraised value. You can file the protest on Form 50-132. Protesting your property value is the only way to lower your property tax! If you don't protest, it ain't getting lower! Many homeowners compare their appraised value with the value listed on real estate websites and think their home was undervalued by the county! That is naive!
Most counties provide an online protest form. It will take only a few minutes to file a protest online.
Property taxes are a form of ad valorem tax i.e. they are based on the value of the property. Texas Tax Code Section 23.01 requires taxable property to be appraised at market value as of Jan. 1st.
Property tax = (appraised value - exemptions) * tax rate
Appraised value bears a direct consequence on the property tax your pay. Tax rates are set by the individual taxing units in your county. e.g. school district, municipal utility, community college, hospital district etc. As such, property tax rates vary by county. You can refer to your property tax bill to get a break-up of the tax rates by individual taxing units. Overall, Texas homeowners pay ~1.6% of their home's appraised value in property taxes each year. According to the Tax Foundation, the median price of a house in Texas is $200,400. That means, Texas households pay an average of $3,200 in property taxes each year.
Simply put, to save money! Think of it as a routine annual maintenance activity. Computerized property value assessment of your home's value can be askew. In Texas alone, over 45% of homes are valued above 100% market value and over 15% are valued above 110% market value! Protesting your property's assessed value can help your county set fair & square taxes for your property.
Consistently protesting every year saves you a lot of money in the long run. If you protest to lower your valuation this year, your next year's valuation starts lower. Compounding saves thousands of dollars over the years!
Besides, if you and your neighbors regularly protest each year, you can collectively prevent sharp rises in taxable values.
Texas allows you to protest your property valuation at NO cost! You are losing money only if you don't protest.
Nobody can represent your interests better than you. All you need is evidence to prove your claims. Once you present the assessor with the right set of comparable properties("comps"), your chance of getting a reduction instantly increases. Homeowners who represent themselves with valid evidence are more likely to get larger reductions!
Nobody can represent your interests better than you. All you need is evidence to prove your claims. Once you present the assessor with the right set of comparable properties("comps"), your chance of getting a reduction instantly increases.
Most counties let you protest online. It only takes a few minutes. Do-it-yourself!
Many protest companies adopt a "floodgate" technique to protests. They flood the appraisal district with a barrage of protests. And use some protests as a bargaining chip. i.e. when they sit with the appraiser to go over all their protest applications, they may let go of some low value protests in order to vigorously pursue the high value ones. As such your protest application may become a sacrificial goat! Most property tax protest companies take away anywhere between 30% to 50% of your savings! That's a significant chunk of your money that should rightly be in your pockets!
Moreover, we at squaredeal.tax have studied protest data and found out that homeowners who protest by themselves get more reductions faster! Most homeowners got a reduction via the CAD's online settlement or a phone call from the assessor! They didn't have to go to the Appraisal Review Board (ARB)! It is evident that county appraisers would rather deal with a homeowner!
Absolutely! It's a common misconception that if your capped appraisal value is lower than the appraised market value, you don't need to protest. The reason behind this fallacious argument is that even if you protest and get your market value lowered this year, you won't actually reduce your property taxes, because property tax is calculated on the capped value minus exemptions.
That is not how it actually works! If you protest and lower your market value this year, it will start lower next year. If more people in your neighborhood protest, it will help keep the entire neighborhood value lower. Your capped value has to catch up with the market value at some point of time! Hence, it is wise to protest every year and keep your market value lower.
Though some CADs claim that they determine market value as on Jan 1st each year independently of previous year's market value, the empirical observations are contrary to that.
Here are the steps to successfully protest your property value:
Property value protests are due by May 15th or 30 days after you receive your notice of value. In case May 15th happens to be a weekend / holiday, then the last date to protest will be the following working day.
Each County Appraisal District (CAD) is responsible for appraising all properties in the county. Your CAD sends you the Notice of Assessed Value (NoV). Hence, property owners have to file their protests with their county appraisal district. Most counties now offer an online protest application. It is the easiest way to protest. You can do that from the comfort of your home and will save time and money!
After the appraisal values are certified by the appraisal district, the county commissioners generally hold a budget meeting with the list of budget items to be adopted for the following year. The items approved at the budget hearing will finally determine your property tax rate. These budget meetings are open to the public. Hence, it is important for homeowners to attend these public meetings and voice their concern of any item deemed unnecessary for the county. These will help keep the property tax rate low.
You don't stop paying your property taxes! It's an obligation you should continue to fulfil so long as you live on the property. However, if you are over 65 and/or disabled, and have an "Over 65/Disabled Exemption", you can defer (ie., postpone) payment of your delinquent property taxes. You need to file a Tax Deferral Affidavit with your County Appraisal District and your tax bill payments are postponed until you live on that home. Be aware that the payments are not canceled, they are only postponed and continue to accrue an interest of 5% p.a. Once you no longer own your home or live in it, you or the inheritor of your property, will have 180 days to pay back all the taxes, pre-deferral penalties and interest, together with the 5% deferral interest. If the taxes are unpaid even after 6 months, then the taxing units will proceed with their prescribed recovery steps including foreclosure, to recover their monies due.
Your overall property taxes comprise tax amounts levied by various taxing units in your county i.e., school district, city, port authority, community college, flood control, hospital district etc. Of these school district taxes generally form the major chunk. Hence, in a relief to senior citizen, Texas property tax code provides a provision for senior freeze, when a residence homestead owner reaches age 65. The school district tax amount you pay at age 65 will be your "senior freeze" or "tax ceiling". In subsequent years, if your property's value increases or the school district increases their tax rate, you will remain unaffected. However, if the school district property tax decreases, your payment will also decrease correspondingly. This tax ceiling guards senior citizen against unforeseen tax raises.
In summary, to lower your property taxes in Texas:
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SQD Taxtech LLC, its managed affiliates and subsidiaries, as a matter of policy, do not give tax, accounting, regulatory or legal advice. Rules in the areas of law, tax, and accounting are subject to change and open to varying interpretations. You should consult with your other advisors on the tax, accounting and legal implications of actions you may take based on any strategies presented, taking into account your own particular circumstances.