By this time, most Texans are tired of talking taxes. With the state legislature gridlocked in how to fund education, the business industry fighting to prevent an increased payroll tax, and consumer advocates renewing the battle against raising the state sales tax, Texans and taxes seem hopelessly at odds with one another. But the buck certainly doesn’t stop here.

While Texas residents enjoy no personal state income tax, we are victims of property taxes that exceed the national average. According to The Tax Foundation, the average annual property tax per Texan is nearly 20% more than the national collection per capita. To make bad news a bit worse, soaring home prices across the state mean higher property taxes. Understanding the property-tax process and what you can do to help will benefit homeowners – and future homeowners – across the state.

The property-tax process
Property taxes are local taxes, and the rate is based on the appraisal of your property. Because the amount depends on value, property taxes are also called ad valorem, or “added value.” While local officials set your rate and collect your taxes, there are usually a number of other tax entities involved, such as school districts, hospitals, and municipal utility districts (MUDs).

The appraisal district in each county sets the value of property each year, and January 1 marks the beginning of that period. During that same time, the appraisal district processes applications for tax exemptions, which include exemptions to homeowners with disabilities, disabled veterans, and senior citizens to name a few.

In mid-May, estimated values are assessed, and the appraisal review board (ARB) begins hearing protests from property owners who believe they have received an unfair tax appraisal. In the past, challenging a tax appraisal was a daunting and expensive task, with some appeals resulting in lengthy litigation. With support of the Texas Association of REALTORS®, Gov. Perry signed into law a new post-appraisal-review-board process for appeals, which takes effect Sept. 1, 2005. This legislation gives homeowners another recourse – binding arbitration. The property owner remits a filing fee to cover the cost of arbitration. The “loser pays” provision means that homeowners who win get their filing fee back.

Tax collection begins in October as bills go out. You have until January 31 of the following year to remit payment, but don’t wait until the last minute. Interest charges and late fees begin accruing February 1. To avoid a huge property-tax bill at the end or beginning of the year, many homeowners opt for a mortgage escrow account. Essentially, your taxes are paid along with your monthly mortgage, and the lender pays the bill.