Some people believe market values for a residential homestead in Texas cannot be increased more than 10% in any one year. Right or Wrong?
Answer: Wrong. Market values can be whatever the market supports. The 10% limitation is an annual limit to the assessed (or taxable) value and it dates from the latest reappraisal. If that reappraisal occurred two years ago, your new assessed value can exceed last year’s by 20%. The limitation applies only to a residential homestead; you must have filed for the homestead exemption.
Your assessed (or taxable) value can be less than your market value (it will never be more) and in that case you’ll pay taxes on the lower value (until it increases 10% per year up to but not in excess of the market value.) So if your assessed (or taxable) value is far less than your market value, why protest that year? The answer is here:
Section 23.23 of the Texas Property Tax Code provides as follows:
- The appraised value of a residence homestead for a tax year may not exceed the lesser of:
- the market value of the property; or
- the sum of:
- 10 percent of the appraised value of the property for the last year in which the property was appraised for taxation times the number of years since the property was last appraised;
- the appraised value of the property for the last year in which the property was appraised, and
- the market value of all new improvements to the property.
What this means is that a property’s assessment can be increased more than 10% from its previous assessment if the previous reappraisal is more than one year old. For example, if the latest reappraisal was two years ago then the new assessment’s limitation on increases is 20%.
All this assumes two things:
- That the homeowner qualified the property for a homestead exemption. If you did qualify the property for a homestead exemption, the limitation applies starting January 1 of the following year. But if you overlooked filing for your homestead exemption, the 10% per year limitation on increases does not apply. Did you qualify your home for a homestead exemption?
- If you added improvements or land, then the value of the improvements or land can be added to the assessment in the following year without regard to the 10% limitation. But in subsequent years the 10% limitation per year would apply to the entire property, including improvements or land.
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