How Do Texas Property Taxes Work?

October 28, 2021

Paying property taxes is an integral part of owning a home in Texas. But how exactly do property taxes work?

There is no state property tax in Texas, so property taxes are only administered at the local level. Therefore, the state government is not involved in setting property rates or collect taxes from property owners. However, Texas state law establishes the process that local taxing units must follow when assessing property taxes. 

This blog will explain what property tax is, how it is calculated, and what you can do to lower your tax bill.

What Is Property Tax? 

Property tax is a type of annual tax that is assessed to real estate owners. In Texas (and most other states), property tax is an “ad valorem” tax, which means the amount you owe is calculated based on the value of the property you own.  Because Texas has no state-level property or income taxes, local property taxes are the primary source of funds for schools, police and fire services, street maintenance, and many other services.

How Is Texas Property Tax Calculated?

Texas property tax is calculated based on three considerations: 

  • Your property’s appraisal value
  • Any exemptions you are qualified to receive
  • The local tax rates

The process for determining each of these values is detailed below. 

Property Appraisal Values

Because property taxes are assessed according to the value of your real estate, the first step in calculating your property tax is to determine the appraisal value of your home.

Your property’s appraisal value should correspond with its current fair market value. In Texas, each county has its own appraisal district that assesses the value of all real estate in the county. Your county’s appraisal district is responsible for determining the value of your home between January 1 and April 30 of each year. 

So, for example, if you live in Dallas, your home’s market value will be determined by the Dallas Appraisal District. If you live in Tarrant County, the Tarrant Appraisal District will appraise your home. The Denton County Appraisal District values homes in Denton, the Travis Central Appraisal District is responsible for assessing Austin homes, and the Harris County Appraisal District handles the Houston area.  

To learn more about the specific appraisal process in your county, you can contact your county's appraisal district or visit its website.

Exemptions 

Another factor that impacts your property tax bill is whether any portion of your home’s value is exempt from taxes. Exemptions identify a specific dollar amount or percentage value of your property that is not taxable, thereby reducing the taxable value of your home. For example, if your property is appraised at $250,000 and you receive a $25,000 exemption, you will be taxed as if your property’s value was $225,000.

The most common exemptions in Texas are homestead exemptions, which can be applied to owner-occupied residences. Everyone who qualifies for a homestead exemption can receive a $25,000 exemption for their school district taxes. Other taxing units can also decide to offer exemptions equaling up to 20% of the property’s value. If a taxing unit allows for a percentage-based exemption, you are entitled to at least a $5,000 reduction of value, even if 20% calculates to less.

It’s important to note that exemptions are not automatically granted, and you generally must submit an application to receive your exemption. Check with your county’s appraisal district to learn more about the local qualification process. 

Local Property Tax Rates

The amount of property tax you owe depends not only on the value of your home but also on the local property tax rates set by taxing units such as counties, cities, school districts, and special districts. Once every property in the county has been appraised, the appraisal district sends a list of property values to each local taxing unit. The taxing unit will then establish the budget for its operations in the upcoming year and calculate the property tax rates necessary to bring in the money it needs. 

Property Tax Billing

Once the property tax rate for a local taxing unit is set, your property tax bill for each local taxing unit is calculated by multiplying your home’s appraisal value (minus any exemptions) by the property tax rate for that taxing unit. Most properties will be taxed by several taxing units.

In some counties, you will be billed separately by each taxing unit. However, taxing units in many counties have contracts with the county tax assessor-collector or the county appraisal district to levy and collect property taxes on their behalf.

When Does Property Tax Change? 

You will be assessed property taxes each year, and the amount you owe often changes. There are two primary reasons your property tax bill may change:

  • Your home’s appraisal value changed
  • The tax rate changed 

For example, say your home was assessed at $150,000 last year. If the appraisal value increases to $160,000 this year, your property tax bill will rise if tax rates remain the same. Similarly, if your home appraisal value stays the same but the local property tax rate increases, you will owe more in property taxes. Often, there is a change to both your home’s appraisal value and property tax rates each year. 

The amount of property tax you owe may also change if you lose or gain exemptions, but this occurs less commonly. 

Can I Get My Property Taxes Reduced?

We know that receiving a higher-than-expected property tax bill can be infuriating, and many people believe that they have no say in the matter. Luckily, this is not true. If you think your house is worth less than the county appraisal district says it is worth, there are steps you can take to get your property taxes reduced. 

Texas law allows you to challenge your property’s appraisal value by filing a property tax protest if you think the appraisal district got it wrong. Many counties allow you to file a protest online, but you may need to submit a form to your county appraisal district’s office. 

Property tax protests are reviewed by an independent group of local citizens known as the appraisal review board (ARB). Each county has its own ARB to resolve disputes between property owners and the county appraisal district regarding property values and other related issues.

Once you file a protest, a hearing will be scheduled in front of the ARB. At the hearing, you or your legal representative will have the opportunity to present evidence to support your argument that the appraisal value of your home should be lower. The appraisal district will also be able to offer evidence that supports the original appraisal amount. 

After hearing each side’s arguments, the ARB will set a final appraisal value for your home. If your protest is successful, your home’s appraised value will be reduced, resulting in a lower property tax bill.

Succeeding in a property tax protest can be tricky, especially if you don’t have experience presenting arguments at hearings or determining the fair market value of real estate. Instead of taking on the appraisal district yourself, consider working with the experienced professionals at Property Tax Protest. We have been helping clients win protests for more than 20 years, and we know how to get your property taxes reduced. You can sign up with us today with no risk involved: you won’t pay a single cent unless we get you a lower property tax bill.

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