Paying Your Property Taxes
Property taxes—also called ad valorem taxes—are locally assessed taxes that provide more tax dollars for local services in Texas than any other funding source. Property taxes help to pay for public schools, city streets, county roads, police, fire protection, parks, libraries and many other services.
Local appraisal districts value property, school boards set tax rates and tax assessor/collectors collect the taxes. State law governs how the process works.
The Texas Constitution sets out five rules for the property tax:
– Taxation must be equal and uniform. All property must be taxed equally and uniformly and valued according to constitutional mandates. For example, all residential homes need to be valued using uniform techniques, as do commercial properties and utility properties. No single property or type of properties should pay more than its fair share of taxes.
– With some exceptions, all tangible property must be taxed on its current market value. The exceptions include agricultural land and timberland. A property’s market value is the price for which it would sell when both buyer and seller want the best price and neither one is under pressure to buy or sell. Land used for farming and ranching can be valued on its capacity to produce crops or livestock, instead of its value on the real estate market. Special timberland appraisal is also available to property owners whose land produces timber for products.
– All property is taxable unless a federal or state law provides an exemption for it and there is constitutional authorization. Exemptions may exclude all or part of property value from taxation.
– Property owners have a right to reasonable notice of increases in appraised property value.
– Each property in a county must have a single appraised value.
There are five main participants within the property tax system in Texas:
– The property taxpayer, whether residential or business, is responsible for paying assessed taxes and has a reasonable expectation that the taxing process will be fairly administered.
– An appraisal district in each county, administered by a chief appraiser, sets the value of taxable property each year. The appraisal district’s board of directors hires the chief appraiser. Local taxing units appoint the directors and fund the appraisal district according to a formula that is based on taxes.
– An appraisal review board (ARB) settles disagreements between taxpayers and the appraisal district about the taxability and value of property. The appraisal district’s board of directors appoints citizens from the community to serve as ARB members.
– Local taxing units, which include school districts, counties, cities and special districts, decide how much money they must spend to provide public services annually. School districts rely on the local property tax, in addition to state and federal funds, and typically set their tax rates at levels that will pay for the difference between budgeted expenditures and state and federal funds.
– The Comptroller’s Property Tax Division conducts an annual Property Value Study (PVS) that assigns a value to property within each school district for state funding purposes. This study, an independent estimate mandated by the Legislature, is designed to ensure equitable school funding. The study ensures equity by detecting instances where school property values are inaccurate and adjusting property values to market value in the state’s funding formula. The state sends more money to those districts that are less able to raise money locally because of insufficient taxable property value. The Comptroller’s values do not directly affect local values or property taxes, which are determined locally. However, when local values are more than 5 percent below state values, the school district could receive fewer state dollars because the funding formulas will use state values to calculate state funding. Through a Comptroller appeals process, a school district can contest the state values. In any case, understanding the reasons for the differences in the state and local values is critical for school districts and the appraisal districts that serve them.
School districts play a vital role throughout the process of appraising the taxable property, protesting the values, adopting the tax rates and collecting the taxes. All too often, however, school districts relinquish some control over the process because it is complex—and the laws, rules and regulations leave board members and administrators frustrated and feeling powerless.
After working with hundreds of school and county appraisal districts, the Comptroller has developed 10 basic guidelines school districts need to know and use to effectively face the challenges before them in assessing and collecting property taxes in Texas. These common sense guidelines help Texas school districts ensure taxes are collected equitably, and in accordance with state laws, and to efficiently administer property tax appraisal and collection.
Q: How do taxing units determine what tax rate to adopt?
A: State truth-in-taxation laws give taxpayers a voice in decisions that affect their property tax rates. Beginning in early August, taxing units take the first step toward adopting a tax rate by calculating and publishing the effective and rollback tax rates.
The effective tax rate would provide the taxing unit with approximately the same amount of revenue it had the year before on properties taxed in both years. A comparison of the effective tax rate to the taxing unit’s proposed tax rate shows if there will be a tax increase.
Q: What if a taxing unit increases its tax rate?
A: If a governing body — other than a school district, small taxing unit or special water district – proposes to adopt a tax rate that exceeds the lower of the unit’s effective or rollback rate, it must publish a quarter-page notice in a local newspaper to announce two public hearings. The hearings give taxpayers an opportunity to voice their opinion about the proposed tax increase. The taxing unit then publishes another quarter page ad to announce a meeting for the governing body to adopt the tax rate.
A school board must publish a quarter-page ad in a local newspaper for a public meeting to discuss the proposed tax rate and budget. This meeting gives taxpayers an opportunity to voice their opinion about the proposed tax rate.
A small taxing unit may mail a notice of the proposed tax rate to each property owner in the unit or may publish a notice of the proposed rate in the legal section of a newspaper having general circulation in the unit. The unit must provide either notice at least seven days before the meeting to adopt the proposed tax rate.
A special water district must publish a tax rate notice at least seven days before a public hearing to discuss the tax rate. The notice must be in a local newspaper that has general circulation in the district. Or, the water district may mail it to each property owner at least 10 days before the public hearing date.
Q: What can taxpayers do if a taxing unit fails to publish the required notice and hold the required meetings?
A: If a property owner believes that a taxing unit failed to comply in good faith with the truth-in-taxation laws, the owner may file a lawsuit in district court to stop collection of the taxes until the taxing unit complies with the law. The owner must file the lawsuit before substantially all of the tax bills are mailed. The courts must decide if the taxing unit complied in good faith with the laws.
Q: What can taxpayers do if a taxing unit adopts a tax rate that is higher than the rollback rate?
A: If a unit — other than a school district — adopts a tax rate higher than the calculated rollback rate, voters in the unit can circulate a petition calling for an election to roll back the adopted tax rate. The taxing unit’s governing body determines if the petition is valid and, if so, calls for an election. If a majority of voters vote to rollback the tax rate, then the unit’s rollback rate becomes the tax rate. Those taxpayers that paid their taxes, receive a refund and the delinquency date is extended.
For school districts, no petition is required. The school board calls for an election if the adopted tax rate exceeds the rollback rate. If a majority voters vote to ratify the adopted rate, the school’s adopted rate stands. If voters disapprove the adopted rate, the school district’s calculated rollback rate is the district’s current tax.
Q: When do taxing units mail tax bills?
A: Taxing units usually mail their bills around October 1.
Q: May I pay only part of the taxes due?
A: State law allows taxing units, at their option, to authorize tax collectors to accept one-half of a taxpayer’s taxes by November 30 and the remainder by June 30 without paying penalty and interest. Not all taxing units offer this option.
Tax collectors also may choose to collect partial payments, payments by credit card, or escrow payments. Such payments do not forestall any penalty and interest on the unpaid portions.
Q: But, I’m on a limited income because I’m disabled or elderly. Is there a special payment plan for age 65 or older or disabled persons?
A: A homeowner that qualifies for the age-65 or disabled exemption may pay current taxes on his or her home in four installments. The person must pay at least one-fourth of the taxes before February 1. With this payment, the homeowner indicates that taxes are being paid in installments. The remaining payments are due before April 1, June 1 and August 1-without any penalty and interest. If the person misses an installment payment, a six-percent penalty and also interest (at 1 percent for each month delinquent) is added to the installment amount.
Q: What is the deadline for paying taxes without penalty and interest?
A: The deadline to pay is January 31. The tax collector will add penalty and interest charges to taxes that are unpaid on February 1. In rare instances, a taxpayer may have a delinquency date later than February 1-check with your tax office.
Q: What is the amount of penalty and interest?
A: If taxes go delinquent, the tax collector adds a 6 percent penalty and 1 percent interest in February. Penalty continues to accrue at 1 percent per month until July 1. On July 1, the penalty is 12 percent. Interest continues to accrue at 1 percent per month until paid. For example, on July 1, unpaid taxes would have accrued a total of 18 percent penalty and interest (12 percent penalty and 6 percent interest).
To this amount, a taxing unit also may add a penalty of up to 20 percent for attorney fees.
Q: Can a taxing unit waive penalty and interest due on delinquent taxes?
A: State law requires a taxing unit’s governing body to waive penalty and may waive interest on a delinquent tax if the taxing unit or its agent caused an owner’s taxes to go delinquent. The property owner must pay the tax no later than the 21st day after he or she knows or should have known of the delinquency. The property owner must request the waiver before the 181st day (six months) after the delinquency to receive a refund of the penalty and interest.
Q: If I serve in the armed forces, may a taxing unit waive penalty and interest due on delinquent taxes?
A: State law allows you to request a waiver of penalty and interest on your delinquent taxes if you are in the United States armed forces during a war or national emergency declared in accordance with federal laws. To receive the waiver, you should file a Military Property Owner’s Request for Waiver of Delinquent Penalty and Interest form within 60 days from the earliest date of the following events: (1) discharge from the active military service; (2) return to the state for more than 10 days; (3) return to non-active duty status in the reserves; or (4) the war or national emergency ends.
Q: When can the additional penalty for attorney fees be added?
A: Taxes that become delinquent on or after February 1 but not later than May 1 and remain delinquent on July 1 of the tax year incur the additional penalty for attorney fees of up to 15 percent. The taxing unit must contract with an attorney to collect delinquent taxes. The tax collector must mail the delinquent taxpayer a notice that the additional penalty will be added July 1. The collector sends the notice not earlier than 30 and no more than 60 days from July 1 – during the month of May. The attorney will pursue collection of the taxes through legal proceedings, if necessary.
Also, the collector that has a contract with an attorney may add the 15-percent penalty to taxes that become delinquent on or after June 1. The delinquent taxes include those under the split payment option, installment payments for over-65 or disabled persons, or taxes on late mailed bills that have a later delinquency date than February 1. The penalty attaches the first day of the first month that begins at least 21 days after the date a notice of delinquency and penalty is sent to the property owner.
Q: If I didn’t receive a tax bill, don’t I get more time to pay without penalty and interest?
A: No. State law provides that failing to send or receive a tax bill does not affect the validity of the tax, penalty, or interest due by an individual, the tax’s delinquency date, the existence of a tax lien, or any procedure the taxing unit institutes to collect the tax. Property owners know that property taxes are due each year and should check if they do not receive a tax bill.
You may want to check with your mortgage company to determine if your taxes were paid timely.
Q: If I’m elderly or disabled and can’t pay my taxes, will the taxing units sell my house and put me on the street for not paying my taxes?
A: If you are 65 or older or disabled, you may defer or postpone paying any current or delinquent property taxes on your home for as long as you own and live in it. To postpone tax payments, you must file a tax deferral affidavit with the appraisal district. You may suspend any lawsuit by filing an affidavit with the court. Or you may suspend a pending sale to foreclose on the homestead’s tax lien, if you file for the abatement up to five days before the date of the sale. The deferral is for all delinquent property taxes owed taxing units that tax the home.
A tax deferral only postpones paying taxes. It doesn’t cancel them. Interest is added at the rate of 8 percent a year. Once the owner no longer owns the home or lives in it, past taxes and interest become due. Any penalty and interest that was due on the tax bill for the home before the tax deferral will remain on the property and also become due when the tax deferral ends. After the tax deferral ends and the taxes remain unpaid, the taxing units may add attorney fees on the 181st day after the deferral and pursue tax collectionsit, past taxes and interest become due. Any penalty and interest that was due on the tax bill for the home before the tax deferral will remain on the property and also become due when the tax deferral ends. After the tax deferral ends and the taxes remain unpaid, the taxing units may add attorney fees on the 91st day after the deferral and pursue tax collections.
Your surviving spouse age 55 or older may continue to receive the tax deferral if the surviving spouse owns and lives in the home.
Q: May a property owner pay a portion of delinquent taxes?
A: Some tax collectors allow delinquent property owners to pay delinquent taxes in installments for up to 36 months. A tax collector isn’t required to offer this option. Before signing an installment agreement, you should know that the law considers the taxpayer’s signature an irrevocable admission that you owe all the taxes covered by the agreement.
Q: When can a taxing unit file a delinquent tax suit?
A: A taxing unit may file a lawsuit at any time once taxes on a property go delinquent. The taxing unit’s last resort is taking a delinquent property owner to court. If a delinquent tax suit is successful, the court costs will be added to the delinquent tax bill. Each owner who owns taxable property on January 1 is liable for all taxes due on the property for that year. This means that an owner who owned taxable property on January 1 can be sued personally for delinquent taxes on a property, even if the property has been sold or transferred since then.
Each taxing unit holds a tax lien on each item of taxable property. This tax lien gives the court the power to foreclose on the lien and seize the property, even if its ownership has changed. The property will then be auctioned, and the proceeds used to pay the taxes.
Contact your local taxing unit to discuss the specifics of your tax situation.
Q: May I defer my taxes if a taxing unit has filed a suit in district court for failure to pay taxes on my property?
A: Yes. You may “abate,” the delinquent taxes if a taxing unit has filed a suit in district court for foreclosure purposes. If a judgment was rendered, you still may abate the taxes; however, you must do so five days prior to the tax sale.
Q: Can a property owner whose property was sold at an auction get that property back?
A: Yes. A person can redeem the foreclosed property within six months after the purchaser’s deed is filed for record. The old owner must pay the new owner the purchase bid for the property, plus recording fees, amount of any taxes, penalties, interest, and costs on the property, plus 25 percent of the aggregate total. If the property was a residence homestead or land designated agricultural use when the lawsuit was filed, the old owner may redeem the property within two years from the date the deed was recorded. The first year includes 25 percent of the aggregate total; the second year is at 50 percent of the total.