Property Tax Questions in Texas

Property taxes -- also called ad valorem taxes -- are locally assessed taxes. The county appraisal district appraises property located in the county, while local taxing units set tax rates and collect property taxes based on those values. Property taxes provide more tax dollars for local services in Texas than any other source -- they help pay for public schools, city streets, county roads, police, fire protection, and many other services.

There are three main parts to the property tax system in Texas: An appraisal district in each county sets the value of property each year. A chief appraiser is the chief administrator and operates the appraisal office.

A citizen board called the appraisal review board, settles any disagreements between a property owner and the appraisal district about a property's value.

Local taxing units -- city, county, school, and special districts -- decide how much money they will spend by adopting a budget. Next, the units set tax rates that will raise the revenue necessary to fund their budgets. The adopted budgets and the tax rates set to fund the budgets determine the total amount of taxes that a person will pay.

The property tax year has four stages: appraising taxable property, protesting the appraised values, adopting the tax rates, and collecting the taxes.

January 1 marks the beginning of property appraisal. What a property is used for on January 1, market conditions at that time, and who owns the property on that date determine whether the property is taxed, its value, and who is responsible for paying the tax.

Between January 1 and April 30, the appraisal district processes applications for tax exemptions, agricultural appraisals, and other tax relief.

Around May 15, the appraisal review board begins hearing protests from property owners who believe their property values are incorrect or who did not get exemptions or agricultural appraisal. When the ARB finishes its work, the appraisal district gives each taxing unit a list of taxable property.

In August or September, the elected officials of each taxing unit adopt tax rates for their operations and debt payments. Several taxing units tax your property. Every property is taxed by the county and the local school district. You also may pay taxes to a city and to special districts such as hospital, junior college, water, fire, and others.

Tax collection starts around October 1 as tax bills go out. Taxpayers have until January 31 of the following year to pay their taxes. On February 1, penalty and interest charges begin accumulating on most unpaid tax bills. Tax collectors may start legal action to collect unpaid taxes on February 1.

No. Texas has only local property taxes levied by local taxing units. The state does not have local tax records on each property and its ownership and does not set your property's value for property taxes.

All taxable property will pay county and school taxes. If the property is located inside a city's boundaries, you may also may pay city taxes. Special taxing units -- junior college, hospital district, road district, and others -- may also tax your property.

If a property is located in a taxing unit on January 1 for more than a temporary period, the property is taxable. State law makes certain properties exempt from taxation-either automatically or by taxpayer application.

A rendition is a form a property owner may use to report the taxable property he or she owns on January 1 to the appraisal district. The rendition identifies, describes, and gives the location of the taxable property. An owner may also give an opinion of the property's value on the rendition form, but it isn't required.

You must file a rendition of business personal property that you own. Before the recent legislation, there was no penalty for non compliance. For the 2004 tax year, there will be a 10% penalty for a late or absent business personal property rendition. In addition, there is also a 50% penalty for filing incorrectly, or evading taxation by not rendering.

You must file a rendition with the appraisal district after January 1 and no later than April 15. The chief appraiser may extend the deadline to May 15 if you request an extension in writing and can show good cause for needing the extension.

The appraisal district determines the value of all taxable property in the county as of January 1 of the tax year. The appraisal district must repeat the appraisal process for property in the county at least once every three years.

For example, the value of a home is an estimate of the price a home would sell for on January 1. The appraisal district compares a home to similar homes that have sold recently and determines the home's value.

The appraisal district also uses other appraisal methods to appraise types of properties that don't often sell, such as utility companies and oil leases. These methods include the cost approach-what it would take to build the property again, less depreciation-and the income approach-what an investor would pay for the property with an anticipated return.

Property owners' taxes are based on the most current year's market value minus applicable exemptions. The appraised value of a residence homestead for a tax year is limited to the lesser of either its market value or the sum of the market value of any new improvements and 110 percent of the appraised value of the preceding year. The 10 percent increase is cumulative - that is, 10 percent times the number of years since the property was last appraised. Therefore, if a homestead increases in value by 20 percent in two years, all of the increase can be added to the appraisal roll. A limitation takes effect for a residence homestead on January 1 of the tax year following the first tax year the owner qualifies the property for the residence homestead exemption. The limitation ends on the January 1 of the first tax year that neither the owner nor the owner's spouse or surviving spouse qualifies for the homestead exemptions.