Property Taxes and Your Home’s Appraised Value

Your property taxes are based on your home’s appraised value. The job of determining your home’s value is done by your county’s Central Appraisal District which is often referred to as the CAD. The CAD has the difficult task of determining your property’s value without ever stepping inside your property. Unlike in other states, Texas CADs don’t have access to the Multiple Listing Service (MLS) databases used by realtors. This means they can’t see what all of the realtors can see – that is the final sales price of a sold house and what other houses are selling for now. Consequently, the CADs rely on the sales price reported by new homes buyers and other public records that help them determine the last sales price. They will also look at building permits to see who’s updating or enlarging their property. If your property hasn’t sold or been updated for many years, they will have a much harder time valuing it. In these cases, they rely on what is called “comparables” meaning similar properties that have sold that are comparable in size, location and age. The larger the county, the more comparables they have and the more likely your appraised value will be accurate.

CADs normally release new property values in April of each year for the value effective of January 1st of that year. During April, you should receive a statement from the CAD identifying their new assessed value for your property. The value is normally divided up between the land value and the value of all improvements on the land. Normally the improvements are a house, but they can be improvements in or above the ground such as water wells, septic tanks, parking lots, garages, barns, etc. Certain types of property can have exemptions which lower the appraised value. Exemptions include a homestead exemption, agricultural exemption, timber exemptions and others. You can call your CAD for a list of all exemptions, and inquire with them if you think you might be eligible for one or more exemptions. The most common exemption is the “homestead” exemption which not only provides a reduction in your overall value and taxes, but also provides significant protection from creditors. Not only do you have the right to exemptions, but you also have the right to protest the value they assign to your property. See our article on the protest process here. It pays to look into possible exemptions for your property.

Counties also have Tax Offices which are separate from the CAD and whose job isn’t to value the property, but to issue the tax bills and collect the property taxes. Some of the smaller counties in Texas (we have 254 counties) are too small to have their own Tax Office so they combine the CAD with the Tax Office into what’s usually called the Assessor/Collector Office. The Tax Offices normally send out their tax bills in October indicating they are due by December 31st. If you have a mortgage that escrows for your property taxes, the tax offices will send your tax bill to your mortgage company who will automatically pay your tax bill. Most mortgage companies pay them in December, and you will be able to include that payment as a deduction in your federal income tax return for that year. If your mortgage company doesn’t escrow for your taxes or you don’t have a mortgage, then you can pay as late as January 31st and not be considered late. If you pay in January, you can’t get the federal tax deduction for the prior year, but will get it for the new year.

We Texans are proud that we don’t have a state income tax and one of the surest ways for a politician not to get elected is to propose we adopt one. That means our local government is even more dependent on our property tax revenue. Because of that, the legislature has established very punitive penalties and interest for taxpayers that don’t pay on time. For most counties in Texas, the total amount of penalties, interest and fees comes to an extra 47.6% by the end of the year! To avoid such huge penalties, be sure to pay your taxes on time! But if you can’t do so, talk to your county about getting on a payment plant or consider one of the State licensed property tax lenders whose business is to provide loans specifically to pay your taxes and save you from the large penalties, interest and fees.