The Texan property tax system is essential to the smooth functioning of local governments and executive bodies across the state. Unlike that of many other states, it's a highly local framework that gives tremendous power and responsibility to local and county authorities. Of course, it's also governed by a basic set of state-level rules that demarcate "good" and "bad" behavior on the part of its actors.
To learn more about the state's property tax system and understand their rights and responsibilities within it, local property owners should begin by asking five questions.
1. Who Levies Property Taxes in Texas?
Texas lacks a "state" property tax that's payable to the central government in Austin. Rather, the state has a patchwork of county-level taxes and "school taxes" that accrue to individual school districts within or between counties. Cities and municipalities may also collect municipal property taxes, and certain "special districts" may assess homeowners within pre-defined areas to defray the cost of reclaiming or conserving sensitive or compromised lands.
While every privately owned parcel sits within at least one county and school tax district, it's crucial for property owners to understand their relationships with other authorities. In many cases, homesteads, commercial property or agricultural land may lie within multiple special districts.
2. How Are Taxes Assessed and Collected?
At the beginning of each calendar year, local appraisal districts assess the value of residential, commercial and industrial properties within the state. These assessments may be made on the basis of recent sales, prevailing market conditions, records of improvement and other factors.
Property owners are typically notified of these assessments during the second quarter of the year. Those who disagree with their findings may protest to their local Appraisal Review Board, a group of local landowners tasked with arbitrating disputes. By September or October, most local taxing districts finalize their tax rates for the year and begin collecting taxes due. Property owners who fail to pay property taxes by the due date may accrue fines or other legal penalties.
3. How Does the Appraisal Process Work?
The appraisal process consists of several parts. Some of these only apply to property owners who believe that their local appraisal district has unfairly valued their parcels.
Early in the year, every appraisal district in Texas reviews sales data within its jurisdiction. This establishes a basic reading of market conditions in the area and provides a framework for the district to make its assessments. Using property-specific information about improvements, renovations, rights transfers and other important issues, the district arrives at a fair value for each property. Property owners who believe that their properties have been overvalued or incorrectly judged as non-agricultural lands may formally appeal to their local ARB. Further appeals may be heard by local superior or circuit courts.
4. Can Just Anyone Serve on the Appraisal Review Boards?
In smaller counties with fewer than 120,000 residents, ARB members may be chosen by the county's board of directors. In larger counties, a specially designated district judge appoints all members. Each tax district's governing body votes on the pertinent board's director. Local appraisers may be selected in this manner as well.
5. What Recourse Do Disenfranchised Taxpayers Have?
Taxpayers who believe that their properties have been unfairly or inaccurately valued may appeal directly to their neighbors. Each ARB is designed to be a "peer jury" that impartially reviews appraisal-related evidence and reaches an equitable settlement. Often, such settlements are framed as compromises. If the ARB's ruling is unsatisfactory, property owners may take their cases to local or state courts. However, such actions are relatively rare.
While these aren't the only questions that Texan property owners should ask, they provide a strong basis for further research and offer clear insights for first-time homeowners or business owners. More information is available on the state's website and through local tax authorities.
If you have further questions on property taxes, please visit O'Connor and Associates. In business since 1974, O'Connor and Associates is the largest independent real estate research and support services firm in the Southwest and conducts business nationwide.*Image courtesy of freedigitalphotos.net