Property Tax 101 – Learn More About Property Taxes in Texas

One thing that every homeowner in Texas should be receiving in the coming days is their property tax bill because it’s usually mailed by the end of October.

Property taxes in Texas are due upon receipt and this means that if they are not paid by January 31st at the latest, they will be considered to be delinquent and a homeowner may start receiving interest charges on their original property tax amount by February 1st.

Understanding Property Taxes in Texas

If you just moved to Texas and purchased a home or you’ve lived here for years and need a ‘refresher” on your property taxes, here is information on property taxes that you may not have known.

 

Taxation of real property in Texas is controlled by provisions found in the Texas Constitution and the Texas Tax Code.  Because taxes are based on the assessed value of the property, property taxes are commonly referred to as “ad valorem” taxes.  

 

Each year on January 1st, a tax lien attaches to the property to secure all taxes, penalties, and interest that becomes due on that particular piece of property. The lien automatically attaches if the taxes remain unpaid.  This lien attaches to the property “by operation of law,” so no further action is required by the taxing authority to perfect the lien and there is no requirement that notice of the lien is filed in the real property records.  Ad valorem tax liens remain in effect until the taxes are paid until the lien is foreclosed by the taxing authority or until the passage of 20 years.  

 

LIEN PRIORITY

 

An ad valorem tax lien takes priority over all other liens or interests in the property, regardless of when the other liens or interests attached. Thus, it enjoys a “super-priority” status. A tax lien takes priority over any mortgage lien on the property as well as any homeowner’s association dues. 

 

EXEMPTIONS

 

An exemption removes part of the value of the property from taxation and thus lowers the taxes. 
The most common exemptions are: 

  • Homestead    In order to qualify for a homestead exemption, the taxpayer must own the home on January 1st of the tax year. The property must also be used as the principal residence of the taxpayer. If the taxpayer temporarily moves away, he can still receive an exemption as long as there is intent to return and another principal residence is not established. Temporary absence must be less than 2 years. Absence for military service or a stay in a medical facility may be longer with special exceptions.  Note, however, a person may not receive a homestead exemption for more than one residence homestead in the same year.  

  • Over 65 and/or Disabled Veteran or Survivor If a taxpayer is eligible for an Over 65 exemption or a Disabled exemption, they can pay their taxes in installments without penalties instead of having to pay it all at one time. The taxpayer may also “defer” or postpone tax payments, with the consent of their lender, by filing a “tax deferral affidavit.”  This only defers the tax liability and interest continues to accrue.  With a deferral, the taxes are due in total 181 days after the death of the owner that qualified for the exemption.  These types of exemptions are transferable to another home. Note, however, if the taxpayer claims another homestead during the year, the exemption is no longer allowed on the prior homestead for the remainder of the year and the taxing units will prorate the taxes based on the number of days elapsing after the taxpayer ceases to qualify to the end of the year.  

  • Agricultural An agricultural exemption lowers the taxable value of the land. There are a few types of agricultural exemptions and having the exemption means the tax office values land on its capacity to produce crops, livestock, qualified wildlife or timber, rather than its value on the real estate market.   It is important to note that if the taxpayer changes the use of the land to a non-agricultural purpose, a “rollback” tax could be owed for prior years.  The county can go back and collect for the taxes starting at 3 years and up to 10 years depending on the type of exemption. The rollback tax is the difference between the taxes paid on the land’s agricultural value and the taxes that would have been paid if the land had been taxed on higher market value for every year permitted under that type of exemption.  In addition, interest can be charged for each year from the date on which the taxes would have been due. As an example, pretend that a property has an agricultural exemption.  The owner has been paying taxes in the amount of $100 per year due to the exemption.  They are now selling their property.  If or when the buyer changes the use the county looks at the tax records and decides that the taxes should have been $10,000 per year if the exemption had not been applied.  Assume they have the right to go back five years based on the type of exemption for that property.  That means the county can issue a supplemental tax bill for $49,500 now ($9900 x 5 years) and the bill will be sent to the buyer.  If this issue isn’t resolved at closing that buyer is going to be very surprised and likely unhappy.  

Contact Me

To learn more about property taxes in Texas, or to search for a home in the Austin area, contact me today by calling (512) 944-7378 or click here to connect with me online.


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