If you’ve read the news lately, this will come as no surprise: Texas is one of the most aggressive states in the US when it comes to property taxes.
In Texas, commercial real estate is consistently over-assessed and overvalued, hence all the headlines about exorbitant property tax bills in the state. Unfortunately, these high assessments and values are often left unchallenged due to the complexity of appeals. For organizations that have significant operations or holdings in Texas, knowledge of the state’s constitution and taxpayer rights can help companies to successfully navigate the state’s tax code and reduce their overall tax liabilities.
Texas Has 5 Basic Rules for Property Taxes
In today’s economic landscape, finding opportunities for capital preservation is imperative. Minimizing your tax burden is an essential tool when it comes to improving your company’s bottom line.
- Taxation must be equal and uniform. This means that no single property should pay more than its fair share. The property taxes your company pays are based on the value of the property it owns. For example, if your office building property is worth half as much as the office building next door (after any exemptions that may apply), your tax bill should be half of your neighbor’s. Uniform appraisal is very important to the Texas property tax system.
- In general, all property must be taxed based on its current market value. Market value is the price that the property would sell for if it were listed today, when both buyer and seller seek the best price and neither is under any pressure to buy or sell.
- Each property in a county must have a single appraised value. This means that the various local governments that you pay property taxes to cannot assign different values to your property – all have to use the same value.
- All property is taxable unless federal or state law exempts it from the tax. These exemptions may exclude all or part of your property’s value from taxation.
- Property owners have a right to reasonable notice of increases in their appraised property value.
Equal and Uniform Assessment
In Texas, the Constitution and statutory law authorizes the over 250 local governments to assess, collect, and determine use of property taxes. Local governing bodies determine the amount of taxes they want to collect and each local government sets its own tax rate.
With a reasonable expectation that taxing will be fair, the taxpayer is responsible for paying property taxes annually for real estate and business personal property. When determining property tax values, it’s important to look not just at fair market value, but also to consider equal and uniform assessment (equity).
Even if your property is assessed at 100% of market value, if comparable properties in the area are assessed below market value, then yours should be as well.
Determining Fair Market Value
Figuring out what the fair market value of your property is should be viewed from every applicable approach – cost, sales, and income – as well as equity.
For organizations that have significant operations or holdings in Texas, knowledge of the state’s constitution and taxpayer rights can help companies to successfully navigate the state’s tax code and reduce their overall tax liabilities.
Property taxes are due annually in Texas. Therefore, the value of your property must be tracked year over year and location by location where applicable. Furthermore, the value has to be analyzed each year based on income, cost, and market conditions and comparisons to determine equity in accordance with property tax law. The Notice of Appraised Value received from the county should also be evaluated annually to determine if the value of your property is appropriate for the market.
Minimize Property Taxes & Improve Financial Health
In today’s economic landscape, finding opportunities for capital preservation is imperative. Minimizing your tax burden is an essential tool when it comes to improving your company’s bottom line.
In Texas, an approach that combines equal and uniform assessment and independent market value is the best way to do just that. Companies that use this approach often see average tax savings of 30% or more annually.
With climbing assessments and values in many counties across the state, finding tax saving opportunities can make a significant difference in your company’s financial future. TAG has represented commercial property owners for over two decades, and along the way we’ve developed tools and systems that allow us to combine our world class consulting team with industry-leading resources to achieve the best results possible for our clients. Learn more about what TAG can do for you by scheduling a 15-minute strategy session here.
