Compared to states like Illinois or New York, property taxes in Texas are pretty straightforward. Texas does not use complicated metrics or equalization factors, and tax bills are calculated simply by multiplying the taxable value by the tax rate. However, when it comes to tax rates, things get a little more nuanced. Instead of there being one single rate for the city or county, there are dozens of separate ones, each coming from a different taxing body or unit.
While we focused exclusively on tax rates in a previous article, this article focuses on the taxing bodies themselves. While there are dozens, we will zero in on a few of the major ones and see how they can have a significant impact on the bottom line for both homeowners and businesses. Some of these can be managed by exemptions, like the homestead exemption, while others are not affected at all by those types of reductions. This leaves property tax protests as the only option to lower these taxes.
Why Taxing Bodies Exist
While Texas is not the only state to use them, taxing bodies have an outsized impact in the Lone Star State. This is because Texas lacks an income tax needed to fund government services. This has led to Texas having some of the highest property taxes in the nation, even higher than those of California. Because they act as the primary revenue stream, property taxes have climbed in the past decade, often doubling. In some counties, especially those in high demand, taxes have risen even higher.
School Districts
Like many states, Texas school districts receive a major share of property tax revenue. These are the largest tax bills that most Texans see. This is due to not only funding schools and teachers, but taxes also go toward benefits and pensions for retired educators and related personnel. Property tax revenue also helps fund employee benefits and pension obligations for educators and school staff. There are several measures in place to help lower these costs to taxpayers, however.
The homestead exemption now exempts the first $140,000 of property value from school taxes. In addition, seniors with the over-65 exemption and taxpayers with the disabled person’s exemption can get an additional $60,000 exempted. In addition, many school districts will offer those with homestead or senior exemptions additional discounts. This recent overhaul of the homestead exemption has decreased those bills significantly. It is also the center of many debates, and Texas could see the total elimination of school taxes for homesteads in the near future.
Municipal Utility Districts (MUDs)
While many counties or cities do not have them, Municipal Utility Districts (MUDs) are vital for Texas infrastructure, as they often handle sewers, water services, and many other similar programs. They are often in areas without traditional water districts, though they are found in urban areas as well. Harris County, for instance, has dozens of various MUD districts. MUDs also typically maintain and repair issues with water mains and other utilities. This makes them vital for most basic services in a given area.
After the homestead and senior exemption overhauls, MUD taxes are often the largest tax bills. This is because each MUD votes on whether to allow the use of homestead, over-65, and other exemptions. This means that homeowners could pay wildly different taxes between districts. Many seniors who have eliminated their school taxes entirely will find MUDs to be their largest burden, especially in districts without exemptions. This is one of the many situations where property tax appeals pay major dividends, even if the homeowner is a senior or disabled, as they can lower these taxes by challenging the appraisal district’s values.
County Services
While there is no single unified tax rate for a county, property owners will often receive a unified tax bill. While this seems to be simply from the county, upon closer review, it can be seen that this is the result of many smaller agencies, all requesting a portion of taxes to meet their annual budgets. This includes emergency services, infrastructure services, port authorities, hospital districts, and more. These are the basic services that any government provides, making funding them critically important. In places without MUDs, this includes water services, sewer, and flood control.
Like MUDs, some counties will allow some or all exemptions, while others will not. Most counties do use some type of limited exemption, which is why this bill tends to be lower than MUDs. While these exemptions pale in comparison to the massive school tax cuts, they can still bring significant relief. In jurisdictions without MUDs, residents usually receive a bill solely dedicated to these taxing units, alongside one strictly for the school district.
Other Units
Many counties feature various community colleges that need funding, with the Lone Star system being the most prominent. Special-purpose districts often account for a good portion of the budget, which includes hospitals. Cities and municipalities, along with their various services, also require funding via property taxes, with each putting together its own tax rate. While individually these require relatively little funding, they can quickly add up.
O’Connor is Here to Help
If you are looking to lower your taxes through appeals, then you will find no better ally than us at O’Connor. For over 50 years, we have been taking on appraisal districts across the state and the nation. Based in Houston, we know how appraisal districts think and what evidence is needed to sway them to your side. In addition, we will aggressively protest your taxes to the highest level possible, often taking it all the way to the appraisal review board (ARB) for formal hearings. We use data-driven techniques and world-class databases to gather all of the appropriate sales and appraisal records needed to make the perfect case.
When you sign up with O’Connor, you are assigned a client success consultant. This person will act as your advocate and primary point of contact. They will answer any questions about your case and keep you updated. We can also send out a concierge team member to look over your property in person, to help identify any issues that could lead to greater savings. There is no cost to join, and you will only be charged a portion of your savings if we can lower your taxes. We can even take over as your representative if you have already filed an appeal, giving you an expert at your informal and formal hearings.
Frequently Asked Questions About Tax Settlements
Q: Why are my MUD taxes higher than all the others?
A: Each MUD decides whether to use exemptions or not when it comes to applying tax rates. Many do not take them into account, often making them the highest tax on your bill.
Q: Can I use multiple exemptions to lower my property values?
A: Yes. Some exemptions can be stacked . Notably, the homestead exemption can be used with either the over-65 or the disability exemption. However, the latter two cannot be used at the same time. They both offer a discount of $60,000 on school taxes, so you must decide which one you wish to use.
Q: Are school taxes going to be eliminated in Texas?
A: The governor is proposing eliminating school taxes for homestead properties, but so far, that is just a proposal. If successful, schools would be funded by the state.
Q: Do businesses have any exemptions?
A: Yes, with the most prominent being the business personal property (BPP), which lets businesses exclude up to $125,000 in tangible property from their taxes. To be eligible, a business must file its BPP rendition before the deadline.
Q: Should I appeal even though my exemptions have eliminated school taxes?
A: Yes, because MUD, county, and countless other taxes are still being levied. Often, these will not see any exemptions applied.
