The property tax appeal deadline is set for May 15 for most Texas counties, which means time is growing short if taxpayers are looking to explore this avenue of property tax reduction. Texans typically know about the other form, which is exemptions. However, these two types of reduction can be paired together to get the best savings possible. When used as a team, appeals and exemptions can cap appraised values, lower the taxable value of a property, and fix outstanding issues that would otherwise never be addressed. In this article, we will go over how exemptions and appeals work together and why Texans should file a protest before it is too late.
Understanding Texas Property Values
Texas has the ninth-highest property taxes in the nation. This is due to numerous reasons, most notably the lack of income tax. Because of this, property levies must be used to fund local government services. These services and organizations are known as taxing bodies. These include school districts, MUDs, hospital districts, emergency services, and dozens more. It is these bodies that set tax rates each year, as they are used to fund the annual budgets of each organization. There is no uniform tax rate for the state, county, or city; rather, there are dozens on each tax bill.
Tax rates are applied to the property value of a home or business, creating a tax bill. There are three types of property value in Texas, each leading to the other. First, there is market value, which is what the appraisal district believes a piece of real estate would sell for on January 1 of the tax year. Next is the appraised value, which takes the market value and constrains it with caps, laws, and other statutes put in place to prevent large spikes. Finally, there is taxable value, which takes the appraised figure and applies exemptions to it. Taxable value is what tax rates are applied to.
How Protests Lower Taxes
Protests do not lower property taxes directly; instead, they bring them down by lowering the property’s value. Appeals do not affect the business or home’s resale value, as this is focused solely on the aspect of taxation. This is achieved by challenging the numbers put forward by the appraisal district. This is challenged on the grounds of either overassessment or unequal appraisal. Overassessment is when the values appraised by the appraisal district are in excess of what the property would sell for on the open market. Unequal appraisal is when a property is appraised higher than neighboring properties with the same characteristics, such as age, size, classification, and location.
In order for an appeal to be successful, it must have justified grounds and the evidence to back it up. Many taxpayers fail in their protest efforts due to using the incorrect grounds or evidence. To prove overassessment, multiple sales records for similar properties should be gathered, provided they have the same or similar characteristics to your property. For unequal appraisal, you should gather as many appraisals from your area as possible, as long as they match your property in characteristics. In addition, these records should be backed up by photography, which can document the condition of the property and show why the appraisal district’s values are too high to be realistic. Repair estimates and other hard records can also paint a picture of the property’s true worth.
If the appeal is successful, then it results in a reduction of the overall value of the property in the eyes of the appraisal district. This means that there will be a lower total for tax rates to be applied to, which typically translates into lower taxes as a whole. This reduction is applied before any exemptions are applied, which leads to a larger potential for a tax cut. Even if the appeal results are small, it still verifies the true worth of your home or business, which can be used in the following years when appeals are filed again.
How Exemptions Lower Taxes
Like appeals, exemptions do not lower taxes directly. Instead, they shield a portion of a property’s value from taxation. This is applied to the appraised value, with the end result being the taxable value. Exemptions always reduce the property value by a set amount. For instance, the homestead exemption reduces the taxable value of a home by $140,000 when it comes to school taxes, with many counties offering more benefits for other taxes. Exemptions provide significant tax relief and are a vital aspect of financial health. Many, including the homestead exemption, add caps, which prevent large increases annually. The homestead cap prevents appraised value from increasing beyond 10%, for example.
Appeals and Exemptions Work Together
It should be obvious how these two techniques fit together. The appeal lowers the overall value, while exemptions then build upon it when it comes to calculating taxable value. This grants an enhanced reduction that is otherwise unavailable to taxpayers. Appeals can also be used to fix systemic issues that no other technique can achieve. There is no other way to challenge incorrect values beyond an appeal. Protests can also be used to fix appraisal errors, such as missing exemptions, the incorrect owner being listed, incorrect square footage, or other issues that can cost money in the long run if not addressed. Many of these issues run in the background, with many taxpayers not even being aware of them. Once these issues are addressed, then exemptions can lower the taxable value further.
Protests Help Both Younger and Older Homeowners
We have previously written articles on how homeowners of all ages can benefit from utilizing protests in their tax reduction goals. To put it simply, young homeowners often see the best results. This is because they do not have as many exemptions to help lower the cost of their tax bills. This means that saving thanks to protests offers a cut that no other path would give. As homeownership is proving difficult to afford for many young people, getting any break can help their budget significantly. Homeowners who are over the age of 65 can use appeals in unique ways. While the homestead and over-65 exemptions can reduce or eliminate school taxes, the same cannot be said for county or MUD taxes. By lowering the overall taxable value with protests, seniors and those with disabilities can see even greater savings, while also possibly filling in any gaps.
O’Connor Offers Help with Exemptions, Appeals, and More
For over 50 years, we at O’Connor have been guiding Texans to their best tax savings possible. Based in Houston, we know how appraisal districts across the Lone Star State think, what evidence they want, and how best to beat them in formal hearings with the appraisal review board (ARB). We can even take on the appraisal district with litigation if your valuable property needs the ultimate reduction. We can also advise on appeals, including complimentary assistance with homestead exemptions. Our agents will file appeals for you and attend every hearing required on your behalf.
When you join O’Connor, you are given a client success consultant, who will guide you on the path to a successful protest. They will act as your primary contact and will serve as your advocate with hearing specialists and other experts. By having one person to turn to, you know that your interests are being looked after, and you have a ready source to answer all your questions. We also provide many of our clients with concierge visits. This is when we send out a team member directly to your home or business. They can answer any questions you have, help you with exemptions, and document any issues that are needed for your appeal. There is no cost to sign up, and you will only be charged a portion of your winnings if we can lower your taxes.
Frequently Asked Questions About Appeals and Exemptions
Q: Will a protest lower the resale value of my home?
A: No, this is a common myth. Protests only lower the taxable value of your property and have no bearing on how much it will sell for on the open market. A successful appeal can often be a boon when selling, as tax bills often appear on retail sites.
Q: How much will a senior with a homestead exemption save on taxes if they use both of their exemptions?
A: Those with both homestead and over-65 exemptions will save a combined $200,000 in taxable value when it comes to school district taxes. Many counties and MUDs will also remove a portion of taxable value from their taxes, though typically much smaller. This is optional, and some taxing bodies do not take exemptions into account. This is why many seniors still benefit from protests.
Q: Will appeals interfere with my exemptions?
A: No, they in fact enhance them. Protests will lower your property’s value first, then it will be taken even lower by exemptions. Using the two in tandem is the best way to maximize savings.
Q: Does O’Connor have a different approach from other firms?
A: Besides our personal touch with client success consultants and concierge visits, we are also one of the most aggressive in the industry. We will take your protest to the highest level possible to maximize your savings. This often means formal appeals with the ARB. Most firms take the first settlement offered.
Q: When is the protest deadline?
A: It is May 15 for most counties. However, the deadline is also tied to your notice of appraised value. You must file by either the deadline or 30 days after your notice was mailed, whichever one is later. If your notice was late, then you will have more time. This adjusted deadline usually appears on your notice.
