While the tax burden for residents is average, Texas is one of the states with the highest effective property tax rates in the nation. Learn about why Texas property taxes are high, and what residents can do to lower their property taxes.
1. No state income tax
Texas does not levy an income tax. However, taxes are a vital source of revenue for the government, so funding has to come from somewhere and ad valorem property tax is the fair and equal solution.
One of the key sources of funding is property taxes. In Texas, the average property tax rate is 1.6% or $5,605. To some, high property taxes may be a tradeoff for no income tax. However, for many, high property taxes are a burden.
2. Varying tax rates between counties
The state does not set local tax rates and does not maintain local tax records of each property. This means the state government can’t regulate taxation, so tax rates vary between counties.
Instead, property tax rates are determined in accordance with taxing unit budgets. School districts rely on local property taxes. Depending on where your property is located, you could be subject to taxes from other entities, such as cities, hospitals, and junior colleges. If you want to control property taxes, then you must control the budget. Every taxing entity controls its own right to vote and increase budgets and the associated tax rate.
For example, two similar properties in Dallas County could pay different amounts in taxes depending on where they are located, what school district they are in, etc.
3. Higher home prices
Housing sales for homes priced over $300,000 continue to increase, according to Texas A&M’s Real Estate Research Center. This is in part due to a lack of inventory of homes priced under $300,000.
The shift in sales toward higher-priced homes continues to influence median home prices, especially in metropolitan areas like Austin and Dallas.
While the average home price in Texas is still lower than many other states, property taxes are based on the home’s value. Just remember that market value is not the same as appraised value, although the two are related and both are influenced by market conditions.
How You Can Lower Your Property Taxes
Fortunately, Texas homeowners have options to reduce their property taxes: 1) apply for a property tax exemption or 2) file a property tax protest.
Apply for a property tax exemption.
There are property tax exemptions that can reduce what homeowners are required to pay. Certain properties or individuals can qualify for these exemptions.
Examples of property tax exemptions available to Texas residents include:
- Homestead exemptions if the property is your primary residence
- Exemptions for senior citizens
- Exemptions for individuals, including veterans, with disabilities
- Exemptions for surviving spouses of a disabled veteran, first responder, or member of the armed forces
- Exemptions for temporary disasters
Qualifications for exemptions can vary from county to county. First, you’ll need to determine if you are eligible. Then you can apply through your county’s appraisal district office. Exemptions are not automatically given, so you must demonstrate your eligibility.
File a property tax protest.
Another option to reduce property taxes is to appeal the home’s appraised value. This is known as a property tax protest.
It is free to file a protest, and homeowners can file a protest each year, regardless of whether or not they received a reduction in the year prior. It is within the rights of every Texas homeowner to appeal the findings of their appraisal district.
Texas homeowners who do not want to file an appeal on their own can hire a property tax reduction firm like NTPTS. Our consultants can handle the entire appeal process for you from start to finish, and there is no fee unless we achieve a reduction.