If you are a new homeowner, it is important to recognize that the majority of Texas homeowners are required to pay property taxes (with a few exceptions). Planning ahead and educating yourself about property taxes can help you better determine your budget and monthly expenses. Michele Harmon Team has answers to the most frequently asked questions about property taxes!
What are Property Taxes?
According to the Texas Comptroller, property taxes are local taxes that provide the largest source of money local governments use to pay for schools, streets, roads, police, fire protection, and many other services. Texas has no state property tax. The Texas Constitution and Statutory Law authorizes local governments to collect the tax. The State does not set tax rates, collect taxes, or settle disputes between you and your local governments.
When are Texas Property Taxes Due?
Property tax bills are usually mailed out in October and the final deadline for payment in Texas is January 31st. There may be an option to make monthly payments, just contact your local tax office for more information!
What Home Improvements can Increase My Property Taxes?
The six home improvements that may provide additional value to your home and could result in a property tax increase include:
- Additional Square Footage
- Structural Changes
- Space Conversions
- Outbuildings such as a storage shed
Is there a way to Lower my Property Taxes?
Yes! There are two ways to lower your property taxes: tax exemptions (if applicable) and by protesting your property’s assessed value.
What Residence Homestead Exemptions are Available?
The Texas Comptroller says there are several types of exemptions you may receive, such as:
- School taxes: All residence homestead owners are allowed a $40,000 residence homestead exemption from their home’s value for school taxes.
- County Taxes: If a county collects a special tax for farm-to-market roads or flood control, a residence homestead is allowed to receive a $3,000 exemption for this tax. If the county grants an optional exemption for homeowners age 65 or older (or disabled), the owners will receive only the local-option exemption.
- Age 65 or older and disabled exemptions: Individuals age 65 or older or disabled residence homestead owners qualify for a $10,000 residence homestead exemption for school taxes, in addition to the $40,000 exemption for all homeowners. If the owner qualifies for both the $10,000 exemption for 65 or older homeowners and the $10,000 exemption for disabled homeowners, the owner must choose one or the other for school taxes. The owner cannot receive both exemptions.
- Optional percentage exemptions: Any taxing unit, including a city, county, school, or special district, may offer an exemption of up to 20 percent of a home’s value. But, no matter what the percentage is, the amount of an optional exemption cannot be less than $5,000. Each taxing unit decides if it will offer the exemption and at what percentage. This percentage exemption is added to any other home exemption for which an owner qualifies. The taxing unit must decide before July 1 of the tax year to offer this exemption
- Optional age 65 or older or disabled exemptions: Any taxing unit may offer an additional exemption amount of at least $3,000 for taxpayers age 65 or older and/or disabled.
When do you Start Paying Property Taxes on a New Home?
In Texas, tax authorities only accept payment from one entity. Therefore, when you buy or sell a home, the property taxes will be prorated at closing to ensure each party pays their portion of the year’s taxes. When closing on a home when taxes are not due, the seller will provide a prorated tax credit for the portion of the year they owned the home.
Example: An August 15th closing will require the seller to pay a prorated tax credit to the buyer for taxes owed January 1st through August 15th. The buyer will then be responsible for the full year’s tax payment when they come due. In contrast, the seller will be required to pay the property taxes in full to the taxing authorities on the Closing Disclosure, if taxes are due at the time of closing. In this case, the buyer will provide a credit to the seller for their portion of prorated taxes.
Example 2: A December 12th closing will require the seller to pay the full tax bill, and the buyers will prorate the sellers for taxes from December 12th through December 31st.
Do you have additional questions about property taxes and how they can impact your home purchase or sale? Contact Michele Harmon Team at 713-818-1330 for more information!