Very simply, Texas does not have an income tax from which to derive funding for local services – fiscal support for things like public schools, police service, fire protection, and road repairs must come from other sources. Property tax is the largest of these sources.
In mid-2007, the Texas Association of REALTORS® conducted a survey of Texas homeowners. Austin-based Baselice & Associates interviewed homeowners throughout Texas to find out what issues worry them. The results of the survey indicate over half of all Texas homeowners rate the issue of property tax and appraisals as a major concern.
In Texas, there are three main players in the property-tax game – the appraisal district, local taxing bodies, and an appraisal review board (ARB).
The appraisal district is responsible for assessing the value of your property. The local taxing bodies are school districts, counties, cities, and other special districts. These entities decide how much money they need to provide their services. Property tax rates are set according to these budgets. The ARB is a group of citizens authorized to resolve disputes between taxpayers and the appraisal district.
Each year between January 1 and April 30, the appraisal district makes value determinations for all taxable property within its boundaries. During this time, they also process exemption applications and other tax relief and property renderings.
The tax itself is calculated by multiplying the taxable value by the tax rate for a given entity. The taxable value may be different from the market (appraised) value if the property qualifies for an exemption or benefits from the appraisal cap.
As an example, let’s consider a homestead that was appraised at $100,000 last year. This year, the property has been reappraised at $140,000. However, Texas law states that the assessed value can only be increased 10% per year for homestead properties, for a maximum taxable value of $110,000.
There are also exemptions that can reduce the taxable value of your property. The most common exemption is called the homestead exemption, which is available to all Texas homeowners and further lowers the taxable value for school tax purposes (for homeowners’ primary residence only). Other statewide exemptions are available, as well, such as those for homeowners age 65 or older and homeowners with disabilities; each of these exemptions reduces the taxable value by $10,000, but you may only use one of them.
Local taxing entities may also offer exemptions, but this varies by county and entity.
The Texas Constitution provides five basic rules for property tax:
As a homeowner, you reserve the right to challenge your appraisal if you believe your property value is too high or if you were denied an exemption.
To start the process, you must file a notice of protest. Official forms are available, but you’re not required to use one. This notice must include your name, the property in question, and that you are not satisfied with the decision of the appraiser. The 2008 deadline was June 2, or 30 days after the notice of appraised value was mailed to you, whichever is later.
The ARB must notify you at least 15 days in advance to let you know the time and place of your hearing, but you can actually contact the appraisal district and attempt to resolve the issue without appearing before the ARB
When you appear before the board, keep your protest simple, emotionless, and fact-based. Provide specifics – pictures and other documents are excellent evidence. Remember that the ARB does not have any say in tax rates, inflation, or local politics – they may only consider the valuation of your property as reported by the chief appraiser. They are an independent, neutral body composed of your fellow citizens and are not beholden to the appraisal district. In fact, the chief appraiser has the burden of proof in these hearings, so if you present a solid case, you have a good shot at winning.
If you do not agree with the ARB’s decision, you may take your case to district court or, in the case of residential properties valued at less than $1,000,000, to binding arbitration.
Most people know that Texas REALTORS® are industry experts – someone to trust when buying or selling a home. You should also know that our public-policy goals are closely aligned with those of Texas homeowners. During the 80th Texas Legislature, which ended in May 2007, the Texas Association of REALTORS® successfully backed several measures to reform the property appraisal process for all homeowners. Texas REALTORS® also backed a successful amendment that provided for property tax relief for homeowners 65 years and older and disabled homeowners.
We anticipate that real estate, property tax, and other matters that concern homeowners will again be hot-button issues in the 82nd legislative session, which opened January 2011. But don’t worry … Texas REALTORS® will be there, working for you.