Property Taxes Set to Reach New Highs
Sellers are taking advantage of DFW’s hottest sellers market since the 70s and buyers will pay the price in more ways than one. If you felt relieved to buy your home this spring only offering 10% over list price then don’t be surprised when the big bad tax assessor comes to town. Here are some things to expect and be better prepared for if you’re in the market.
1 . Death and [Property] Taxes
We all live with certainties in life and property taxes are no exception.
But what are property taxes? A property tax is an ad valorem tax on the value of a property. The tax is levied by the governing authority of the jurisdiction in which the property is located. Property taxes are local taxes that provide the largest source of money local governments use to pay for schools, streets, roads, police, fire protection and many other services. Texas law (at the local level) establishes the process followed by local officials in determining the value for property, ensuring that values are equal and uniform, setting tax rates and collecting taxes. The state does not set tax rates, collect taxes or settle disputes between you and your local governments.
Your local municipality and county have the say when it comes to your tax rates and your local county tax assessor gives their opinion on the taxable (assessed) value of your home. But there are more parties involved. See below for an example of how a Plano resident might be taxed based on their taxable value. You can see how this resident is paying a city tax to Plano, a county tax to Collin County, a tax to Plano ISD, and a tax to the local community college. Other cities can have county hospital taxes such as Dallas County residents paying to a tax to Parkland Hospital.
2. Texas Among Highest Property Tax Rate in Nation!
I think I can speak for all of us when I say I love not having a state income tax. And the high property tax bill doesn’t hurt as much when property values are lower. However, we are going on 8 straight years of appreciation (average single family home) and that yearly tax bill hurts a little more each time. Texas has one of the highest tax rates as a percentage of value and we are going to feel that this year.
3. Rising Values mean Rising Taxes
Taxable values are sure to skyrocket after months of record sales prices. For example, the median price of single family homes in Flower Mound has increased 10% from April of 2020 to April 2021.
Currently, the state of Texas has a max taxable value increase of 10% year over year but that does not apply when a house sells. So that 1985 house you bought in 2020 for $400,000 that was paying $4,000 a year in taxes is about to see its tax bill double in 2021. And homes that did not sell can expect to be at or near that 10% increase this year.
One more thing to note on buying a house in this market. You should not be surprised if the tax increase is substantial when buying older homes. Make sure your lender is running your mortgage estimates based off a perceived future tax value and not the non-exempt taxes from the previous year. This can be misleading and make you think your payment is lower than it really is.
4. What to Do?
Protest your taxes annually. Fight for a lower taxable value and reference your county assessor website for timeline and how-to on protesting. You can either do this yourself or even consider hiring a company to do it for you.
5. Hope for the Future
Turns out that lots of people don’t like property taxes. In fact, East Texas Rep. James White has proposed a new bill that would eliminate property tax in the state of Texas and replace them with a value-added taxation, commonly known as a “VAT.” A VAT is a tax at each stage of the product supply chain at any point that value is added. When a product changes hands from producer to packager, or packager to delivery, a tax is collected on that transaction. A kind of consumption tax, VAT differs from a sales tax in that its total cost burden is distributed across the product’s journey from point A to point B to the consumer whereas a sales tax is shouldered chiefly by the end-consumer.
Only time will tell if this bill gains any traction but it is fair to say that Texas homeowners will look for new ways to cope with rising property values in places like the Dallas / Fort Worth Metro.
- Austin Wyble, Realtor & Co-Owner
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I hope you enjoyed reading this article as much as I enjoyed making it! The opinions stated here are my own and it is important you form your own too. Feel free to drop a comment below.