As property tax protest and appraisal season is coming to an end in Texas, you're more than likely to see a few property owners wringing their hands. Receiving your appraisal notices can be a stressful moment, especially considering that the appraisals determine how much you will owe in property tax. Property owners will have to pay their property taxes for the foreseeable future.
What happens, however, if you get your appraisal notice and it's a lot smaller than what you expected? One of the major causes of lower-than-expected appraisal notices is omitted property. The Texas Property Tax Code refers to omitted property as any "real property that was omitted from an appraisal roll." In this case, "real property" refers to any improvements made to a property like land expansion, construction, or other general enhancements to a property. If these enhancements are not assessed by the chief appraiser at the county appraisal district (CAD), then your appraisal will be much lower than it should be.
Is Omitted Property a Good Thing?
On the surface, omitted property may seem advantageous to property owners. They can essentially make improvements to their land without ever having to pay any increase in taxes. Of course, it’s not as simple as that. While omitted property could temporarily be a good thing, it will cause more problems than solutions in the long run.
In the short run, you’ll be paying property taxes on a property value that has been appraised much lower than necessary. For instance, if you add a second story on to your home in Houston but the appraisal roll does not indicate that massive improvement, then you will have to pay considerably less for your Houston property tax. Indeed, you would be paying whatever you paid prior to adding a second story.
In the long run, however, neglecting to report your omitted property can cause major problems for you (and your bank account). The CAD can levy delinquent taxes on property, meaning that you may have to pay up to five years’ worth of back property taxes. This is likely unsustainable for most property owners and entirely negates any of the benefits experienced from not reporting omitted property.
What to Do with Omitted Property
If you receive your appraisal and it doesn’t account for any improvements you have made on your property in the last year, then you should take your concern to the CAD. Your property appraisal value will likely be around the same as previous years. For instance, if your property was appraised at $100,000 before you added a second story and $100,000 after you added a second story, then the CAD probably omitted your improvement.
Although you may want to reap the benefits of paying a lower property tax, you should understand that the CAD will find out one way or another. The CAD's job is to assess properties and, while they may miss your property for a few years, they will eventually discover their omission. So, again, your first step should always be to take your concern to the CAD as soon as you notice an error. This can help you avoid the pain of several years of back taxes that you can’t ever hope to pay.
If the CAD sent you your appraisal notice too late, then you may need to file a protest with appraisal review board (ARB). Although most property owners use the ARB for protesting over-assessments, you may need to protest for an under-assessment on omitted property. This will, of course, increase your tax bill, but it will be well worth it.
Things to Keep in Mind
Property tax questions are certainly common because of all the nuances involved in property tax law. The same holds true for omitted property. One thing you should keep in mind is that the CAD only appraises properties in their current state as of January 1 for each year. So, if your house is under construction on January 1, then the property assessment will only be current as of that date. Even if the construction project is finished by April or May of the same year, you will only have to pay taxes on the property as it appeared on January 1.
So, if you make renovations between January and April and the difference in value isn’t apparent on your appraisal notice, then you should be all right. The CAD will appraise the renovations on your property for the following year’s property cycle.
In the end, you should always try to pay taxes on your omitted property or you run the risk of accumulating an enormous tax bill.
More questions on omitted properties? Contact O’Connor & Associates today and one of our property experts will address your concerns!
Posted in: Texas Property Tax Keywords: Texas Property Tax Code, Houston property tax, Property tax questions, Omitted property