How Do Texas Property Taxes Work?

Yes, it happens more than you would think. Texas’ Constitution prohibits discriminatory practices in assessing taxes. For example, suppose your recently purchased property is assessed at its purchase price but others in the subdivision are not affected.  You may be appraised unequally even at market. (1)

Conversely suppose a recent sale (or sales) in your neighborhood disproportionately affects your property resulting in a higher assessment than your neighbors’.  Or suppose yours is assessed at market while others are assessed at less than market.

One of the least understood arguments for a reduction is Inequality of Appraisal (also sometimes call equal and uniform taxation).  When successful it always results in a value below market.  Inequality is specified in the Tax Code and commonly used for newly acquired commercial properties.  But it is often not used effectively by those protesting residential values even though it applies equally there.

Many agents don’t know how to pursue Inequality because it’s complicated.   At Property Tax Protest we do it successfully more often than not.  And, of course, if there’s no reduction there’s no fee.

There are three criteria for relief under Inequality:

• the appraisal ratio of the property exceeds by at least 10 percent the median level of appraisal of a reasonable and representative sample of other properties in the appraisal district, or
• the appraisal ratio of the property exceeds by at least 10 percent the median level of appraisal of a sample of properties in the appraisal district consisting of a reasonable number of other properties similarly situated to, or of the same general kind or character as, the property subject to the appeal; or
• the appraised value of the property exceeds the median appraised value of a reasonable number of comparable properties appropriately adjusted. 

Two of the three criteria use ratios and one uses value.  All require judgments that must be supported by data; you can’t just make the claim without facts.  These are complex arguments that are over the heads of most homeowners and many agents.  

The law is weighted in your favor; if you prevail on only one of the criteria the decision goes in your favor.  Also, the Texas Supreme Court has ruled that value determined by Inequality prevails over value determined by market (2).  Thus, Inequality results in a taxable value below market.

Why bother?  Because left unprotested, your most recent value can become the floor for subsequent increases.  A successful protest this year raises the district’s bar for next year (3).  We can save you money for years to come by using all the tools available.

(1) “…it is unfair, and constitutionally prohibited, to require one taxpayer to pay a tax based on market values if other taxpayers are paying a rate that is lower than the market value of their properties.” Texas Supreme Court, Weingarten Realty v. Harris County Appraisal District.

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(2) “If a conflict exists between taxation at market value and equal and uniform taxation, equal and uniform taxation must prevail.”  Ibid.

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(3)    [Effective January 1, 2020] . . . In the next tax year in which the property is appraised (following a successful protest), the chief appraiser may not increase the appraised value of the property unless the increase by the chief appraiser is reasonably supported by clear and convincing evidence when all of the reliable and probative evidence in the record is considered as a whole. . . . The burden of proof is on the chief appraiser to support an increase in the appraised value of property under the circumstances described by this subsection.  Texas Property Tax Code, Section 23.01(e)

What Are My Chances of Success:In recent years about 60% of the homeowners who protested their values obtained reductions.  The others include many whose values were already at or below market – and therefore had no case to present to the Appraisal Review Board — and many who failed to appear at their scheduled hearings.  Those who filed a protest and actually appeared with good data had a higher success rate than those who had no supporting data.  With good data and a professional approach to the ARB your chances of success should be closer to 90%.To sign up, simply return these two Documents. Send no money.

Local taxing authorities (cities, counties, hospital districts, school districts) must publish certain information and schedule public hearings before approving a tax rate.  Senate Bill 2 currently (Spring 2017) being debated in the Legislature will affect how that unfolds.  Here’s a primer:

Proposed Tax Rate:

This is the rate taxing authorities estimate they need to cover their budgeted expenses for the following year.  If taxable values increase year to year, a lower rate can generate the same revenues but if the rate is not reduced the unchanged rate can generate increased revenues from higher taxable values.  Taxing authorities can then claim they didn’t increase taxes.  (They didn’t; the appraisal districts increased values.)

Effective Tax Rate:

This is the rate that would generate the same revenue as last year.  If appraisal districts have increased taxable values year to year then a lower Effective Tax Rate will generate the same revenues as in the prior year.

Rollback Tax Rate:

A taxing authority may not exceed the Rollback Tax Rate – currently 8% but the Legislature is currently (March 2017) considering a reduction to 4% — which is the amount by which total tax revenues – not rates — can exceed the prior year’s revenues without allowing its voters to petition for a lower rate.  All taxing districts are affected except school districts which must hold an automatic rollback tax rate election in November if the rollback rate is exceeded.  For the others – city, county, hospital district, etc. – a rollback petition is required and the rollback election takes place in a month other than November, when most voters turn out to vote.

Senate Bill 2This bill would reduce the Rollback Tax Rate to 4% and would automatically trigger a rollback election in November.  The effect on local taxing authorities would be immediate and would encourage them to keep total tax collection increases below 4%.  In a market of increasing values this means a lower tax rate applied to an increased tax base.But would limiting total tax collection increases to 4% benefit taxpayers?  In a growing market like DFW, where population growth continues to put demands on local authorities, a 4% cap on tax collections could result in less services just when more services are required.  As Texas continues to attract people moving from other states municipal and county services may be unable to keep pace.  That’s why local governments are almost unanimously opposed to the 4% cap in SB 2.The opposing argument is that if demand for services requires total tax revenues to increase more than 4% then taxing authorities should be required to justify the increase to their voters.According to the Texas Comptroller’s Biennial Property Tax Report school taxes generate 54 percent of local property taxes statewide.  So SB 2 addresses less than half the property taxes paid by Texas owners.To sign up, simply return these two Documents. Send no money.