Texas isn't known as a high-tax state, but its homeowners do face one of the country's highest property tax burdens. Laypeople who wish to understand the Texas state property tax system would do well to review this information and follow up with their local tax authorities.
Background on Property Taxes in Texas
Texas is one of a handful of states that doesn't impose an income tax on its citizens. As such, the state derives the bulk of its funding for local services and improvements from property tax levies. Localities use property taxes to fund the construction and expansion of schools, roads, public projects, infrastructure and more. They may also use property tax revenue to fund ongoing services and pay public employees' salaries.
Texans have been paying property taxes since the state's founding, but the codes that govern their imposition and payment change with some frequency. While all property taxes are set and collected by local authorities like county and city governments, Texas imposes an overarching legal framework that directs these activities.
Texas sets five "constitutional standards" for property tax collection:
- All property types must be taxed "equally and uniformly."
- Taxes must be assessed on each property's appraised value as of January 1 of the tax year.
- All non-exempt property must be taxed.
- Property owners must be notified of property tax increases.
- Properties that exist in multiple appraisal districts can't have multiple appraised values.
System Structures and Protocols
Every year, the various local entities that impose property taxes follow a three-step process for collecting and disposing of their revenues. This works as follows:
- The chief appraiser in each appraisal district sets appraised values for each property under his or her jurisdiction. Appraisal districts are generally coterminous with individual counties.
- A landowner who disputes his or her property's appraised value may appeal to an appraisal review board.
- Actual tax rates are set in accordance with the annual budgets of the local agencies and departments that fund their activities through property taxes. The jurisdictions of these agencies and departments may be smaller than the jurisdictions of the state's appraisal districts.
Taxpayers' Rights and Responsibilities
Taxpayers are protected by the above-mentioned "constitutional standards." In addition, local landowners have the right to apply for specific exemptions. Since exemptions are generally waived after a specific date, it's crucial that eligible landowners make these applications in a timely fashion. Homeowners who fail to pay their taxes on time may be disqualified from receiving certain exemptions and could face additional penalties.
Exemptions, Ceilings and Special Provisions
Texan property owners enjoy multiple property tax exemptions that effectively reduce the appraised values of the homes to which they apply. Of course, not everyone qualifies for these breaks. Common exemptions include:
- Homestead exemption: All Texas homesteads enjoy a $15,000 exemption to offset a portion of applicable school taxes.
- Flood control/Farm-to-market road exemption: In the counties that impose special taxes for flood control or farm-to-market road maintenance, property owners receive a $3,000 tax exemption.
- Optional exemptions: Specific agencies have leeway to impose additional exemptions as budgets demand. Each exemption must be valued at $5,000 or more.
- Seniors' exemptions: Senior citizens enjoy additional school tax exemptions of $10,000 as well as optional exemptions of $3,000 or more.
It might seem as if Texas's property tax system is complex or contradictory. While it's true that the system has many moving parts, it's no less complicated than that of many other states. Moreover, it's important to put the occasionally punitive nature of Texas's property levies into perspective. Since the state's taxpayers aren't responsible for paying state income tax, local property owners may enjoy a lower tax burden than their peers in other states. Things could be far worse for Texan taxpayers.
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