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Property Tax Reduction

Property tax reduction is both a right and a responsibility for property owners.  Property taxes are effectively a stealth tax since the property owner typically does not write a check to disperse funds to the tax entity. Instead, the mortgage servicer who has been escrowing funds throughout the year writes a check to pay the property taxes.

When the mortgage servicer pays the property taxes, it insulates the property owner from the pain of paying the property tax bill. If property owners were individually writing checks to pay their property taxes, many more Texans would be applying for property tax reduction.

Ad valorem tax

Property taxes are an ad valorem tax, meaning based on value.   Hence the property taxes for a $1,000,000 house would be 10 times the property taxes for a $100,000 house assuming the same tax rate and no exemptions. Many families are chasing the American dream of owning the largest house possible not realizing they are simultaneously volunteering to pay as much property taxes as they can afford.

How are Property Taxes Calculated?

The three factors involved in calculating property taxes are the assessed value, tax rate, and any exemptions. Let’s review and explore with sample house that has an assessed value of $300,000, a 2.5% tax rate and $50,000 in exemptions. This is a simple example since typically the exemptions are calculated for each of the tax entities instead of being grouped. Following are the calculations for the above example:

Property Taxes = (Assessed value – Exemption) x Tax Rate

($300,000 – $50,000) x 2.5%

$250,000 x 2.5% = $6,250

Reduction in Tax Rate is Not Practical for an Individual

Tax rates are set by tax entities after the tax rolls are certified. The writer believes individual taxpayers have little to no impact or ability to impact the process of setting tax rates.  The property owner can impact one of the three factors used in calculating property taxes, namely the tax assessment.

Do You Qualify for an Exemption?

Most homeowners who live in their primary residence qualify for a Texas homestead exemption.  There are many types of homestead exemptions, but for now we will focus on the basic homestead exemption. By example, there are also homestead exemptions for over 65, disabled and veterans.

The first step to reducing your property taxes as a Texas homeowner is to file for a homestead exemption with the local appraisal district if you qualify. There is no cost to file for a homestead exemption. You don’t need to pay a consultant to help you obtain a homestead exemption.  Once a homestead exemption is granted, you typically will not need to apply for it in subsequent years. However, it does make sense to review the appraisal district records each year when you’re filing your property tax protest to confirm the homestead exemption is still intact.

There are only two requirements to qualify for a Texas homestead exemption. First, you must own the home on January 1, and second, the home must be your primary residence as of January 1st of the relevant tax year. When you apply for your homestead exemption, you will need to provide documentation that your drivers’ license address is the same as the home address.

Filing for a homestead exemption is the most meaningful step a homeowner can take to reduce their property taxes. It is free and once it is approved it typically remains in place until the property is sold. Homeowners realize significant property tax reduction from homestead exemptions.  There are few exemptions available for most commercial property owners.

Property Tax Reduction Maximized with Annual Appeal

Texas property owners won about 65% of all property tax appeals at the administrative level (informal hearing and appraisal review board hearings). There are over 20 million tax parcels in the state of Texas but only 2 million tax parcels are appealed on an annual basis. Those who do not protest are almost certainly paying more than their fair share of property taxes. The owners who appeal will receive property tax reduction two years out of three at the administrative level. If the owner pursues a judicial appeal, they have a 90% chance of reducing their taxes below the level set at the appraisal review board, based on data published by the Texas Comptroller.

Property Tax Reduction via both Market Value and Unequal Appraisal Appeals in Most States

Tax reduction is achieved by reducing the taxable value often referred to as the appraised value or assessed value. In many states, only a portion of the market value of the property is taxable. In Texas, 100% of the market value of property is taxable unless otherwise exempt. Property owners have little chance of affecting either tax rates or the amount of property tax exemptions. However, property owners are successful two times out of three when they appeal the taxable value. Reducing the taxable value directly reduces the property taxes you pay. Consider the following example:

Property Taxes 2.7% Tax Rate

Initial Market Value / Assessed Value $300,000 $8,100
Market Value / Assessed Value after Appeal $270,000 $7,290
Property Tax Savings / Reduction $810

The savings from property tax appeals are substantial. Statewide, two out of three property owners who appeal their home will be successful each year in Texas. There is no cost to file a property tax appeal in the appraisal district will not provide evidence regarding the evidence to value your house unless you file an appeal.

Texas property owners can also achieve property tax reduction based on an appeal on unequal appraisal. in an appeal on market value, the owner is contending that the appraisal district has valued the property at more than its actual market value. In an appeal on unequal appraisal, the owner is protesting that the appraisal district has assessed their property at a higher level than similar comparable properties. Market value is not a factor in an appeal on unequal appraisal. You can appeal unequal appraisal even if the market value is higher than the value set by the appraisal district.

There are many reasons to appeal your Texas property taxes every year to maximize property tax reduction. This article lists many of the reasons.

Review Property Taxes Before You Buy a Property

Review the total property taxes before you purchase a property. In many cases, people will look at the total monthly payment or PITI. If you are purchasing a newly built home, review what the taxes will be based on the purchase price and not on the current assessment. Depending on how much of the home was completed as of January 1st of the relevant tax year, the tax assessment at the time of your purchase could be much lower than or similar to the purchase price. Many homeowners have been dismayed when they find that the total monthly payment they expected is actually going to be hundreds of dollars higher because of the tax assessment at the time of closing was artificially low.

My Property Taxes are $10,000 per Month?

I will never forget the conversation with the homeowner of a recently bought $5 million home. He was concerned about the property taxes and wanted to provide a tour of the property before engaging us to do his property tax appeal. The property owner surprised me at the end when he said “I didn’t realize how high the property taxes were going to be.”  (The annual property taxes were about $125,000.)  The owner was a bright highly-paid professional but it did not occur to him to calculate property taxes before the purchase of a large home.

Two Key Steps for Property Tax Reduction

Property owners should seek available property tax exemptions and should appeal their property taxes annually. Property ownership is a serious financial responsibility. Affirming you have the correct exemption (if applicable; commercial owners generally do not receive exemptions) and appealing your property taxes annually are the two key steps to effect property tax reduction.

Blog Author

Patrick O’Connor, MAI, Owner and President
Patrick O’Connor has been active in reducing property taxes, providing expert witness testimony and appraising commercial real estate property since 1983. Pat is active in publishing analyses and data with respect to the real estate market, while being a highly regarded media spokesperson for the real estate community. He holds a MAI, the highest achievable designation from the Appraisal Institute, and is a licensed senior property tax consultant. Pat earned a Master of Business Administration from Harvard University. In 2001, he authored the first definitive consumer guide to Texas property taxes, Cut Your Texas Property Taxes.

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O’Connor is the largest property tax consulting firm in the U.S. Our licensed tax consultants and administrative support team benefits home and property owners by reducing property tax assessments, filing personal property renditions, reviewing tax statements, protesting over-assessed property values, and attending informal tax hearings and appraisal review board meetings.


We work tirelessly to protest and lower your taxes with:

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