Texas Has Low Tax Burden Despite High Property Tax

A report recently released from the Tax Foundation provides information on the tax burdens across the country. The tax burden is a measure of the effect of state’s taxes on taxpayers, and ranks the states based upon their tax burdens. The highest tax burden belonged to New Jersey, at 12.2% of income, while Alaska had the lowest, at 6.3%. The average tax burden for a Texas taxpayer was 7.9%, which ranked 45th in the country.

White states have the ten lowest tax burdens. Image by The Tax Foundation

Another report by the Government of the District of Columbia, entitled ‘Tax Rates and Tax Burdens in the District of Columbia – A Nationwide Comparison’ went into more detail on this data. This report used the largest city in each state to calculate tax burdens: in the case of Texas, Houston was used. Below are the estimated tax burdens for a hypothetical family of three at different levels of income, what percentage of income the tax burden is, and where that ranks amongst all the states:

• $25,000 – 10.0% – 36th
• $50,000 – 6.0% – 44th
• $75, 000 – 5.6% – 44th
• $100,000 – 5.6% – 44th
• $150,000 – 4.4% – 43rd

What might make this surprising is that Texas is well known for its high property tax, which in their study ranked 5th in the nation. While the property tax may be high, there is no income tax, and although sales tax was above average, auto tax was less than half the national average. With the bulk of the state’s taxes being based off of home values rather than split between realty values and income, this allows for property tax deductions to have a greater impact on the taxpayer.

While Texas’ property tax rates are certainly high, taxpayers carry a lower tax burden than most of the country. This might not make Texas the most ideal place for a second home tax-wise, but it’s not too hard in terms of tax burdens to call Texas home.

• For information on Texas property tax exemptions, see: http://www.window.state.tx.us/taxinfo/proptax/exmptns.html
• For the Government of DC report, ‘Tax Rates and Tax Burdens in the District of Columbia – A Nationwide Comparison’ http://www.taxadmin.org/fta/rate/dc_tax_burden_09.pdf
• For the Tax Foundation’s Report by Mark Robyn and Gerald Prante, see: http://taxfoundation.org/research/show/22320.html

There is a lot to learn regarding property taxes and protesting them, and hopefully this AustinHome.com blog will help you understand the basics of how protesting your houses appraisal value can lower your property taxes.

Property Tax

With no state income tax, the property tax is the main source of revenue for local governments in Texas. Property taxes are calculated by taking the assessed value of your house, subtracting any exemptions, and multiplying by the tax rates.

Calculating tax rate in a house worth $550,000 with $20,000 in exemptions and a tax rate of 5% would create this formula:

(550,000-20,000)*.05 = 26,500
So in this case, the owner would pay $26,500 in property taxes.

How the appraisal process works:

Your local appraisal office uses mass appraisal to determine the value of multiple homes at a time. Houses are grouped according to several factors, such as location, age and size. There are three different ways which housing values can be determined within a group of houses, but most home values will be determined using the market retail sales approach, which gives an appraisal value based upon home sales within the same groupings. The appraisal value is the value you are protesting, as the property tax rates themselves cannot be protested.

When are appraisal values sent out?

From the Texas State site:

The Legislature requires the chief appraiser to deliver, by April 1 or as soon thereafter as practicable if the property is a residence homestead or by May 1 or as soon thereafter as practicable in connection with any other property, a clear and understandable written notice to a property owner of the appraised value of the property owner’s property if:

• the appraised value of the property is greater than it was in the preceding year;
• the appraised value of the property is greater than the value rendered by the property owner; or
• the property was not on the appraisal roll in the preceding year.

This is done using a form called Notice of Appraised Value. If the increase in your appraised value is $1,000 or less, the chief appraiser, with the approval of the appraisal district board of directors, may dispense with the notice.

Protesting your appraisal

If you disagree with the appraisal district’s value of your property, you have the option to file a protest with the appraisal review board. The appraisal review board is a group of citizens who act as a neutral body and are authorized to resolve disputes between taxpayers and the appraisal district. In most cases, you have until May 31 or 30 days from the date the appraisal district notice is delivered to protest your appraisal – whichever date is later.

How your home value might be different from the appraised value

-Factors which reduce your home’s value not listed in the districts survey, such as a cracked foundation or the presence of nearby cell towers.
-If the retail market has gone down but your appraised value has remained the same.
-Check the appraisal to make sure the property description and measurements of your property are correct.
-The chief appraiser might also have denied an exemption which you are entitled to.

How to help your property tax protest

-Getting an independent appraisal by a real estate appraiser can give you an assessment of your homes value which can help your claim. If you have recently refinanced or received a home equity loan, you may have a professional appraisal already available.
-Find out how much houses which are comparable to yours have been selling. A Realtor® can help get you this information. Contact Maggie Falvey for information.
-The date which the appraisals are put into effect is January 1^st, so home sales closer to that date will carry more weight.
-The appraisal district must give you the information which they used to set the value of your house, and they are also required to allow you to inspect any information which they plan on using at the hearing.
-You can be represented before the appraisal review board and can hire someone to take your case; they may either charge a flat fee or take a percentage of money which you save by employing them.

Protesting your appraisal value can be a cost-effective way to lessen the taxes your have to pay. Weigh the money you could save against the time and cost of taking your case before the appraisal review board to determine if protesting your property taxes is the right decision for you.

Links:

Travis Central Appraisal District:
http://www.traviscad.org/index.html

Williamson Central Appraisal District:
http://www.wcad.org/

List of Texas Property Tax Exemptions:
http://www.window.state.tx.us/taxinfo/proptax/exmptns.html

The State of Texas’ Property Tax Assistance page contains information on property taxes, property appraisal protests and appeals, how to protest, and everything else tax related
http://www.window.state.tx.us/taxinfo/proptax/