The property tax is the largest funding source for local services in Texas. Property taxes help to pay for public schools, city streets, county roads, police, fire protection and many other services.
Property taxes are based on monetary value. For example, the property tax due on a vacant lot valued at $10,000 would be 10 times as much as the tax for one valued at $1,000.
Property taxes are local taxes. Your local officials establish a value for your property, set tax rates and collect your taxes. State law, however, governs the process.
The Texas Constitution sets out five basic rules for the property tax:
- Taxation must be equal and uniform.
All property, whether residential or commercial, must be taxed equally and uniformly. No single property or type of properties should pay more than its fair share of taxes.
- Generally, all tangible property must be taxed on the basis of its current market value. The Constitution provides certain exceptions, such as productivity values for agricultural and timber land.
A property’s market value is the price it would sell for when both buyer and seller seek the best price and neither is under pressure to buy or sell. Farm and ranch land can be valued on its capacity to produce crops or livestock instead of its market value. This is called agricultural appraisal. Similarly, special tim•berland appraisal is available to property owners whose land produces timber for commercial use.
- All property is taxable unless a federal or state law exempts it from the tax. The Texas Legislature may provide for Constitutionally approved exemptions.
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.
How does the system work?
The Texas property tax system has four main participants:
- The property taxpayer, whether residential or business, is responsible for paying taxes and has a reasonable expectation that the taxing process will be fairly administered.
- An appraisal district in each county, administered by a chief appraiser, sets the value of your property each year. The appraisal district’s board of directors hires the chief appraiser. Local taxing units appoint the directors and fund the appraisal district according to a tax-based formula.
- An appraisal review board (ARB) settles disagreements between you and the appraisal district about your property’s taxability and value. The appraisal district’s board of directors appoints citizens to serve as ARB members.
- Local taxing units, including the school districts, counties, cities and special districts, decide how much money they must spend to provide public services. Property tax rates are set according to taxing unit budgets. Some taxing units have access to other revenue sources, such as a local sales tax. School districts must rely on the local property tax, in addition to state and federal funds.
The annual tax levy has four phases: property valuation, a protest period, tax rate adoption and tax collection.
Each Jan. 1 marks the beginning of property appraisal, which depends upon the use of the property as of Jan. 1 and current market conditions.
Between Jan. 1 and April 30, the appraisal district processes tax exemption applications, agricultural appraisals, other tax relief and property renditions. The appraisal district also makes value determinations for all taxable property within its boundaries. After May 1, the appraisal review board begins hearing protests from property owners. When the ARB finishes its work, the appraisal district gives each taxing unit a list of taxable property known as a certified appraisal roll.
In August or September, the elected officials of each taxing unit adopt tax rates. Several taxing units may tax your property. Every nonexempt property is taxed by the appropriate county and local school district. You also may pay taxes to a city and to special districts such as hospital, junior college or water districts. The tax roll is created when tax rates are applied to appraised values.
Tax collections begin around Oct. 1, when tax bills are sent to property owners. Taxpayers have until Jan. 31 of the following year to pay their taxes. On Feb. 1, penalty and interest charges begin accumulating on most unpaid tax bills. Taxing units may impose an additional penalty on July 1 for legal costs on unpaid taxes.
The Property Tax Assistance Division (PTAD), a division of the State Comptroller’s office, conducts an annual Property Value Study (PVS) for each school district for state funding purposes. This study measures property values within a school district to ensure equitable school funding. The state sends more money to districts that are less able to raise money through local taxes. The Comptroller’s values do not directly affect local values or property taxes.
What is the taxpayer’s role?
As a taxpayer, you should know your rights, understand the remedies available and fulfill your responsibilities under law.
Know your rights:
- You have the right to equal and uniform tax appraisals. Your property should be appraised at market value in the same way as similar properties in the area.
- Your property should be taxed on its agricultural or timber value if it qualifies for such treatment and you apply timely.
- You should receive all tax exemptions or other tax relief for which you qualify, if you apply for such relief in a timely fashion.
- You should receive notices of changes in your property’s value or in your exemption status.
- You should be informed about a taxing unit’s proposed tax rate increase and have an opportunity to comment on it before the taxing unit’s governing body.
Understand your remedies:
- If you believe your property value is too high, or if you were denied an exemption or agricultural appraisal, you may protest to your ARB. If you do not agree with the ARB’s decision, you may take your case to binding arbitration in some instances or to district court.
- You may speak during public hearings when your elected officials are deciding how to spend your taxes and setting the tax rate.
- You and your fellow taxpayers may limit major tax increases through elections to roll back or limit tax rates.
Fulfill your responsibilities:
- You must apply timely for general, aged 65 or older, disabled or any local-option homestead exemptions with the appraisal district where your property is located.
- You must apply for other exemptions, agricultural appraisal and other forms of tax relief before the deadlines set by law.
- You must report, or render, taxable business personal property to your appraisal district. In doing so, you may give your opinion of the property’s value.
- You should ensure that your property is listed with your correct name, current address and property description.
- You must pay your taxes on time. You may not withhold or attempt to pay taxes into a special account to protest your assigned value, tax rates or the budget of a taxing unit.
You may represent yourself in any property tax matter. You also may appoint a representative — commonly called an “agent” — to handle specific duties. You don’t need an agent to file for exemptions on your home; just obtain an application form from your appraisal district.
To appoint an agent, you must provide that person with written authorization to represent you. You must use a special Appointment of Agent form (Form No. 50-162), available from the appraisal district or the Comptroller’s office. No form is needed, however, if the person is your attorney, mortgage lender, employee or a person acting only as a courier.
The Appointment of Agent form asks you to cite a date upon which your authorization for this person will end. If you don't provide an ending date, the agent will continue to represent you until you file a statement ending the appointment or appoint a new agent.