How much property tax you will owe each year is determined by the tax rate set by the county the property is in and the value of the property. The process of valuing a property is called an appraisal value of homes and is managed by the county appraisal district. Here we will examine how property appraisal methods are conducted in Texas and your options as a property owner if you disagree with how your property was valued.
Properties are required to be appraised at market value to calculate property taxes. But what is market value? The Texas Comptroller’s Office, which is the steward of the state’s finances, defines market value as how much a property would be sold for in the current market under three conditions:
It is for sale in an open market with a reasonable time for the seller to find a buyer. Both the seller and the buyer know of all the uses to which the property is adapted and for which it can be used, and its enforceable use restrictions. Both the seller and buyer are trying to maximize their gains, and neither can take advantage of the other’s need to buy or sell quickly.
Each county appraisal district in Texas is responsible for conducting a fair market appraisal to determine the taxable value of a home in its boundaries. An accurate appraisal of properties in each county should be completed at least once every three years. The Uniform Standards of Professional Appraisal Practice are used to ensure that the same methods and techniques are used when appraising similar properties.
County appraisal districts will appraise each property to determine its market value. Information such as property size, usage, construction type, sales of comparable properties, age, location, and individual characteristics of the property are all taken into account when valuing properties. However, the appraisal district is only responsible for determining a property’s value and does not make decisions on tax increases.
Mass appraisal is the valuation of a set of properties using shared data, standardized techniques, and statistical testing. Individual features that influence the market value of a property must be taken into account when determining its market value. For example, the appraisal district divides properties into categories based on their size, usage, and building type. When determining the tax bill, the income approach, market approach, or cost approach might be used on the taxable property.
After your property is appraised, a Notice of Appraised Value is sent to inform you of your property value. A detailed notice will contain the following information:
Notice of appraised values must be sent by May 1st (or April 1st for residence homesteads). You will want to make sure your property value is in line with what you are expecting. If you disagree with the appraised value, you can file a protest with the Appraisal Review Board (ARB).
With the high number of residences that would need to be valued by each tax assessor, it is not feasible for every property to be evaluated each year. Therefore, appraisers often rely on spot-checking and average home values for the area. This leaves many homeowners with overvalued properties and property tax bills that are higher than they should be.
An important right you have as a taxpayer is to file a protest with the ARB. You can protest if you disagree with the appraisal district’s valuation of your property or any of their actions that concern your property. In most cases, you have until May 15th or 30 days from the date the Notice of Appraised Value is delivered, whichever is later. Each Notice of Appraised Value will contain information on the protest process.
The appraised value of your property and your county’s tax rate is used to determine the property tax you will owe. If you are paying through an escrow account, your lender will estimate the property taxes to try to ensure that you contribute enough money during the year. If you under-contributed or have not saved enough to cover your taxes, you can look into requesting a tax deferral if you qualify or seek private-sector options such as a property tax loan.
Exemptions or “exempt” excuse a portion of the real property’s value from taxation, even though they have no effect on the property’s market value. Homestead exemptions only apply to the primary house of the property owner. Homeowners and disabled veterans can take advantage of a range of homestead exemptions, including general residential homestead, over 65, surviving spouse (age 55 and over), disability homestead, 100% residence homestead exemption for disabled veterans, charitable, religious, freeport, and pollution control. These are just a few of the exemptions available. Each taxing unit determines whether or not to provide the optional exemption and what percentage of taxes are used.
In order to protect homeowners from exorbitant property valuation increases, a cap on property tax value increases was set. In Texas, the property tax appraisal limit is set at 10%, which means that the taxable value of a homestead cannot increase by more than 10% per year. This limit does not, however, protect new homeowners or commercial property owners, and even a 10% increase in the property appraisal value can be significant.
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We pride ourselves on finding solutions to suit the unique needs of our clients. If you would like to discuss our property tax loans- please contact our experienced team at AFIC today.
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YOUR TAX OFFICE MAY OFFER DELINQUENT TAX INSTALLMENT PLANS THAT MAY BE LESS COSTLY TO YOU. YOU CAN REQUEST INFORMATION ABOUT THE AVAILABILITY OF THESE PLANS FROM THE TAX OFFICE.
If you are over 64 or disabled, don’t get a property tax loan, contact your tax office about a deferral.
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