The Texas property tax system is problematic for many homeowners. Rising home prices and legal loopholes have taken a toll on Texans who struggle to keep up with their unsustainable tax payments.
Even worse, the current system is notoriously inequitable due to rules that favor wealthy property owners and large businesses over the average middle-class taxpayer. In this blog post, we will discuss the existing legal framework in Texas and highlight possible reforms that could provide significant property tax relief for struggling homeowners.
Allowing local taxing districts to grant flat-dollar exemptions would be a welcome improvement to the current system. It would level the playing field and provide equitable savings for homeowners of all property values.
These flat-dollar exemptions are already offered by school districts, which are legally required to grant a uniform $40,000 homestead exemption. However, other local taxing districts are only permitted to offer percentage-based exemptions that favor high-value property owners.
For instance, a 10% exemption on a $100,000 home only reduces the property’s taxable value by $10,000. But the same 10% exemption will reduce the taxable value of a $1,000,000 home by $100,000.
Allowing local taxing districts to offer a flat-dollar exemption would help ensure that all homeowners receive the same level of tax relief regardless of their home's assessed value.
Texas homeowners have the right to protest the tax appraisal value of their property if they believe it has been assessed to have a higher value than a similar property. This type of property tax protest is known as an “equal and uniform” appeal.
A significant issue with this kind of protest is that the law fails to define what constitutes a “comparable property.” This results in property owners comparing their homes to properties in other counties, even though the appraisal district was not involved in assessing that home and may not have access to all the relevant information.
Additionally, comparable home values may be reduced due to earlier property tax protest hearings in the same year. Under the current system, homeowners are incentivized to file their protests as late as possible in the hope that comparable properties will have their values reduced before their hearing is held. When property values for multiple homes are dropped based on successive protests, median home values in the area can sink rapidly.
To address these issues, the state legislature should restrict equal and uniform protests by location and limit the ability of property owners to reduce their appraisal values based on same-year protest hearings.
Unlike most states, Texas does not require property buyers or sellers to report sale prices to the local authorities. The lack of real estate sales price information disclosure in Texas means that it is difficult for local governments to properly assess the value of a property and determine its market value.
This impacts property tax appraisals for large commercial properties and expensive homes, often causing them to be undervalued. As a result, their owners pay less than their fair share of property taxes, indirectly increasing the financial burden on lower-value homeowners.
To correct this systemic problem, it is essential that all real estate transactions be reported and made available for appraisal purposes.
While Texas lawmakers have taken some steps to address these issues in the property tax system, it may be years until we see progress. In fact, some of these much-needed reforms may never come at all.
Fortunately, you can already save money on your property taxes by filing a property tax protest. Sign up for Watchtower Protest’s risk-free services today, and we will handle every step of the property tax protest process. And the best part is, we won’t take a single penny unless we successfully lower your property taxes.
Property tax in Montgomery County - a property tax consultant can help you manage your tax obligations, exemptions, deductions, and how to challenge your assessment.