Why Property Tax in Texas is Higher | Here are 3 Reasons (2024)

How Much Are Property Taxes in Texas?

According to recent research, the property tax rate in Texas is one of the highest in the USA, with the average homeowner paying around one-third more than the national average. Why is property tax in Texas higher? Find out more according to these three factors.

Reason Number One – Texas is Highly Dependent on Revenue from Property Taxes

Despite having the 6th highest property taxes in the nation, the state of Texas has an average tax burden for its citizens. Sales taxes for the state are comparatively low at 6.25% (it can reach a maximum limit of 8.25%), and Texas is one of nine states that does not have personal income taxes.

However, as taxation is a vital source of revenue for local government, the burden falls squarely on property taxation to compensate for the lack of other revenue. This money (property tax revenue) is utilized to fund essential resources and public services for Texas citizens, including public schools, libraries, emergency services, road maintenance, and community safety measures.

If property tax reform occurred, this would likely result in redistributing the tax burden by implementing state income tax or introducing higher sales tax rates to make up this shortfall. This is unlikely to occur even though it would mean tax relief on our annual property tax, as many of us enjoy the fact that there’s no income tax.

Reason Number Two – Property Values are on the Increase

How Are Property Taxes Calculated in Texas in Relation to Property Values?

Ad Valorem Tax is based on an item’s assessed value, so ad valorem property taxes refer to the assessed value of a property. Texas tax laws dictate that an appraisal district in each county, administered by a chief appraiser, is responsible for appraising property values each year.

For a the appraisal of a taxable property, property tax is determined as a percentage of your home’s value, so the more your home increases in value, the higher your property tax bill will increase. For example, a residential property in Austin that is appraised at a value of $250,000 will pay around $4,933 per year. If this same home’s value increases to $275,000, the annual property tax bill will increase to $5,426. This is great for selling your home but is a substantial increase in annual taxation if you’re not. If property owners do not agree with the property appraisal value or find that their home has been overvalued, they can lodge a formal protest with the appraisal review board to have the property re-evaluated.

Reason Number Three – These Taxes are Set at a Local Government Level

The State of Texas doesn’t determine what your property tax bill will be, as this is set by your local authorities. While this is a good thing in some ways, as it keeps the power to change taxes local to your own community, it does mean that the state government can’t act to regulate or influence this taxation. The most they can do is pass a bill that tightens regulations on tax hikes, pass a law that allows residents of Texas to vote on tax increases in their local community, or increase state funding for public education (the largest item that property taxes cover). For these changes to occur, they would have to be passed by the state legislature, which hasn’t happened at this point. In fact, state funding for public education has dropped in recent years from 45% to 38%.

Property Tax Penalties are Increasing – Here’s How Property Tax Lenders Can Help

Failing to pay your property taxes on time means facing stiff property tax penalties because the local government is so reliant on this revenue source. The absolute final date for property tax payments in Texas is 31 January every year – unless you have qualified for property tax exemptions or deferrals. From 1 February, all unpaid property tax bills are considered delinquent, and penalties and interest begin accruing. Currently, these penalties can amount to around 43% of your current tax bill, making it even more challenging for people who are unable to pay on time.

This is a difficult situation to find yourself in, and the last thing you want is to be paying even more on your bill - fortunately, there is a solution to your property tax burden. If you are struggling to keep up with the high Texas property tax rates, lenders can offer you expert advice and services to deliver fast, effective tax relief. At American Finance & Investment Company, Inc, our compassionate and qualified team will settle your property bill quickly. We can help with an affordable property tax loan and a customized repayment plan to help you get back on your feet.

Interested in a property tax loan in Texas? Contact one of our qualified property tax lenders today.