Taxes are one of the toughest subjects to talk about for every layperson. Appraisals, rollback tax rates, provisions, and other terms are confusing. But as a taxpayer, you must try and understand these to the best of your ability.

Understanding these terms in their simplest form is essential. You need to know where your money is going and why you have to pay. There are also times when you can take action to lower your property tax.

Taxpayer Guide

One of the things we need to know is the rollback tax rate provision. Since the Texas property code has been reformed, there are new rules.

What Is a Rollback Tax Rate?

First off, what is a rollback tax rate?

The rollback tax rate is the calculated maximum rate that the law allows without voter approval. It is a calculated rate which divides a property’s overall taxes into two categories. These are the M&O and the debt services.

These are also known as interest and sinking.

The rollback tax rate allows a taxing unit to get almost the same amount of tax revenue spent for the previous year. Plus, there’s an 8% increase for day-to-day operations.

Voters in a taxing unit can create a petition that calls for an election. This will aim to limit the tax increase. But this only happens when the tax rate is higher than the rollback tax rate.

School districts are exempted from this.

The Current Rollback Tax Rate

The state of Texas has reformed its property tax code. The Property Tax Reform and Relief Act of 2019 has four goals. These are the following:

  • Lower the rollback rate from 8% to 2.5% for the biggest taxing unit in Texas
  • Mandatory automatic tax ratification election if the rollback rate is exceeded
  • To make Information regarding tax rates proposed by the local taxing units accessible to taxpayers
  • Make it easier for taxpayers to be more vocal and open about their opinions

But not every property is a part of the proposed 2.5 percent rollback tax rate. If a taxing unit collects less than $15 million in the property tax levy, the rollback tax rate remains at 8 percent. Taxing units that collect more than $15 million property tax levy plus sales tax are lowered to 2.5 percent.

There’s also an automatic rollback election if they exceed the 2.5 threshold.

How Does This Affect You?

So, is this a good thing or a bad one?

The 8 percent threshold has been around since 1891. It has stayed there since then besides a decrease in the inflation rate. The reformed Texas property code drops it to its lowest since its inception in 1979.

Taxpayers will benefit from the current rollback tax rate. Since the threshold is lowered, it means you have more chances to pay a lower property tax. Additionally, the automatic election makes it easier for you to appeal your property taxes.

Then again, it’s still almost impossible to change your tax without an expert. You may understand more than the common taxpayer. But an industry expert knows every nook and cranny.

Before the end of a tax year, it’s best to talk with a real estate professional. Know your property’s worth and the possible tax rate you’ll get. If it exceeds the current rollback tax rate threshold, know what you should do from there.

Conclusion

Tax is a tricky topic, especially if you have no idea what the terms mean. It’s even more confusing when there are changes to the law.

If you have a taxable property, it’s always important to know the latest trends and news.

 

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