Understanding property tax and appraisals

It’s springtime in Texas – and that means lots of different things; pleasant weather, baseball season, and real estate appraisals.

Why are property taxes so high?

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.

How it works

There are three main players in the 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. In this example the maximum taxable value is $110,000.

There are also exemptions that can reduce the taxable value of the 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.

It’s really not a bill

If you haven’t already, you should soon receive your notice of appraised value from the appraisal district. I’d like to address a common misconception about this notification.

As it says on the notice, the amount you see is not your tax bill. It’s an estimate of the bill using the previous year’s rates, which will likely change in late summer when the taxing authorities set the tax rates. This estimated tax liability is based on the current year’s assessed value, which may also change through a successful protest.

Your rights

The Texas Constitution provides five basic rules for property tax:

  • Taxation must be equal and uniform – whether residential or commercial, no single property or type of property should pay more than its fair share of property tax.
  • Generally, all tangible property must be taxed on the basis of its current market value – market value is a hypothetical and is an amount considered by the appraiser to be a fair price to both would-be buyers and would-be sellers if neither were under pressure to buy or sell. As an exception, farms, ranches and commercial timberland can be valued on its capacity to produce instead of its market value.
  • All property is taxable unless a federal or state law exempts it from the tax - exemptions may exclude all or part of a property’s value from taxation.
  • Property owners have a right to reasonable notice of increases in appraised property value
  • Each property in a county must have a single appraised value

Challenging your appraisal

As a homeowner, you have 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 2010 deadline is May 31, 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 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 or local politics – they can 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, you may opt for binding arbitration.

Working for you

Most people know that Texas Realtors are industry experts – professionals to trust when buying or selling a home. You should also know that our policy goals are closely aligned with those of Texas homeowners.

For additional real estate information, I invite you to visit