Texas Property Tax 101
In Texas, property tax is an ad valorem tax, which means it is based on the value or values of the property. The property owner must file a property tax returns to determine the property’s value and therefore how much property tax is owed. Often the county appraisal district for the place where the property is located will send out appraisals to residents. The property tax is calculated by multiplying the appraised value of the property with a given tax rate. The tax rate can be altered or changed by the local government or the appraisal group.
Property taxes are paid by the property owner. Typically the appraisal district will enter into an agreement with the local government(s) to assign the tax collections to them. Whilst Texas state does not impose a property tax, the local government does. If the property is in more than one county, or multiple counties, then the local governments will be the determining factor of what the tax will be; which then results in higher taxes for the property owner .
An important point to note is that due to Texas property tax being based on assessed value, a home that is worth a million dollars identical to your home, may pay a greater amount of tax than you will because all assessments and taxation will depend on the same authority.
Property taxes can be paid either once every year or broken down into two payments every year. The appraisal districts usually have an agreement with the local government to send out the property tax bills. Local taxpayers will receive them in which they must pay the property tax in accordance with the Texas laws. What is important to know is that these taxes become a lien on the property. This means that if the taxes are not paid then the government can seize the property. Tax is an extremely significant aspect of property ownership in Texas, especially because of the nature of the "ad valorem" taxation system.
The Benefits of a Texas Property Tax Lawyer
One of the prime advantages to hiring a property tax lawyer in Texas is their ability to assist businesses, commercial property owners, and residential property owners with tax disputes, mitigating Texas property taxes, and complying with Texas state tax laws.
A Texas property tax lawyer will help deal with a tax dispute from start to finish. The lawyer will conduct all negotiations, represent your interests with the county appraisal district, and represent you if needed in appraisal review board hearings. If necessary, your lawyer will prepare and file a lawsuit in district court to challenge a property tax assessment. Your property tax lawyer will be able to help you understand the property tax laws and address any issues that arrive throughout the process.
A lawyer will seek to reduce your property tax liabilities. Texas property taxes are ad valorem taxes assessed on real property and personal property. A property tax lawyer will help determine whether your property is assessed at its fair market value in order to decrease property tax liability.
A property tax lawyer will also help comply with property tax laws, which can be complicated. You may be able to benefit from exemptions on your property to reduce taxes. Property tax lawyers can help businesses qualify for a manufacturer’s exemption on personal property or residential properties qualify for homestead exemptions, among others.
Common Texas Property Tax Problems
Property tax assessments
Whether the appraised property value is far too high or unfairly low, it is possible to successfully challenge this value. The appraisal process used by local taxing authorities is not infallible, so a well-structured and researched appeal can often help someone reduce their tax bill. A swift-action deadline is June 1, one that applies to most metropolitan counties in Texas, such as Harris County and Travis County.
Residential properties with an appraised low of $5,000 (this amount varies per county), agricultural properties and open space land are not subject to an appraisal, so owners of these properties do not need to worry about disputing their tax statement — the appraisal has been done for them.
Failure to pay taxes
Local governments are dependent on ad valorem taxes to finance public services. In turn, residents are expected to pay their property taxes and must do so by Feb. 1 of the following year. Taxes can be paid via a mortgage escrow account, or through direct payment to the local taxing authority.
If a homeowner requests the entity to pay their taxes on their behalf, it generally will do so, but with a small fee added on for the service. If a person does not satisfy their tax bill by Jan. 31, the consequence most likely will be the additional assessment of interest and fees on the outstanding tax invoice. Local taxing entities typically add interest and penalty fees which can increase the total rate from 12 to 19 percent, or even more, depending on the level of the total property tax delinquency. As time passes and the amounts are not paid, the penalty fees can continue to increase on the remaining balance. They can rise to well above the original amount owed, and can even lead to a tax lien being placed on the property.
Filing a tax return
Some property owners should be aware of other requirements that might come with owning property. Some of these stipulations require a tax return to be filed and any failure to do so can lead to problems:
Texas does not judge the tax situation lightly, as residents can be hit with a fine or fee up to $500 due to a failure to file a property tax return. These penalties can be assessed even if the tax bill is already too high and a person is in the process of filing an appeal.
Those who do not represent their property values correctly in their return can be fined and forced to go through an audit.
How a Lawyer Can Lower Your Property Tax Bill
The law in Texas is in favor of a variety of exemptions and tax strategies that may seem like they require the help of a tax lawyer. For example, an exemption on your property taxes can exist to assist individuals, such as the disabled, seniors, and veterans, or for a particular use of the property. A tax lawyer can help you identify whether your property qualifies for any type of exemptions.
There are also legal loopholes that can allow clients to lower their property tax bill legally. Sometimes, the loopholes scammers use quickly become legal because property owners fail to fight back. A tax lawyer can help identify these loopholes, such as a concession process that allows for rebates on property tax under certain conditions.
Another tactic a tax lawyer can use to negotiate the lowest property tax bill is to argue your property’s value. Your real estate rental lawyer will be able to show whether your property is valued too high based on the square footage and other numerical evidence. If there is an error that inflates the amount of property taxes you owe, property tax lawyers can help address them and negotiate the resulting price down.
Selecting the Right Property Tax Lawyer in Texas
Selecting a qualified property tax lawyer in Texas is essential to achieving the best possible outcome for your tax appeal. Look for someone with years of experience in property tax law and a long track record of successfully representing clients. Specialization in real property tax law, especially in your county or area, is also important . The best lawyers are those who can pinpoint the issues and offer strategies for resolution.
Be sure to read client reviews posted on the lawyers’ websites and on independent review sites. References from other lawyers and professionals in the real estate industry are also good sources of information.
Fees for a Property Tax Lawyer
The cost of hiring a Texas Property Tax lawyer may vary depending on the size of the firm and nature of services. Small to medium sized law firms, including the Law office of Pat Maloney, typically bill for services on an hourly rate with a retainer. The Law Office of Pat Maloney provides free consultations for Property Tax issues and is representative of most small to mid-level law firms.
Some larger firms will charge a set fee for filing a property tax lawsuit, which would include researching the lawsuit, filing the lawsuit, and possibly conducting a deposition. Although the upfront cost of hiring an attorney for a lawsuit is higher, many clients feel it is more reasonably priced than paying hourly rates, and makes certain that all work that is performed meets the full requirements of a lawsuit.
Filing deadlines have specific cutoff dates, and attorneys that are experienced in commercial property tax litigation are naturally aware of these deadlines. Cost-saving benefits may be found by using attorneys to defend lawsuits. Any short deadlines or issues with your property tax lawsuit may require a quick response from an attorney.
The property tax suit may be settled before it is filed. Most attorneys that represent commercial clients will discuss the property tax dispute with the client. It is important to have a qualified and experienced attorney listen to your explanation of the dispute. Your understanding of the background of the dispute will help the attorney prepare a case that hopefully results in a good settlement. The retainer fee and hourly rates will apply when it is necessary to file a lawsuit to obtain the best possible settlement.
Another researcher of property tax law and practices, Walter Allen, has provided some insight into the fees and billing practices of the Property Tax Division. Allen provided the following property tax error statistics for 2012: 65% of the errors made by the district courts are due to a lack of attention to detail by the attorney. Proper discovery, taking of depositions and proper attendance at the trial usually results in a favorable error reversal for the attorney’s clients. Most attorneys agree that this percentage is actually much higher.
Successful Outcomes: Case Studies in Property Tax Resolution
A few examples of successful outcomes from property tax resolution cases handled by skilled Texas attorneys are as follows:
Case Study 1:
A local business owner who recently acquired a commercial property soon learned that the former owner had failed to pay the ad valorem taxes on the property for several years. The business owner was approached by a representative of the county appraisal district, which demanded payment of the back taxes. A knowledgeable property tax lawyer was able to negotiate a settlement with the county appraisal district to resolve the matter.
Case Study 2:
A man purchased an undeveloped plot of farmland near a large city with plans of converting it into a development project. Through diligent research, he was able to identify easements and various rights-of-way on the property that complicated his development plans. He engaged in negotiations with the appropriate government agencies to resolve these issues and received assistance from an experienced lawyer.
Case Study 3:
A Texas lath and plaster company was undergoing a financial audit by the state’s comptroller. The comptroller was tasked with ensuring that the firm correctly classified its workers, and the classification of some workers affected whether the company owed state payroll taxes. A lawyer assisted the owner by arguing for a more favorable classification of the workers, resulting in a lower tax assessment.
When to Reach Out to a Property Tax Lawyer
When it comes to determining an individual or commercial property owner’s property taxes, most physical and personal property within a given geographical area are subject to the same assessment and taxation formula. However, this does not mean that every property owner in the same zone will be taxed equally or that disputes over property taxes do not arise. When a property owner feels that they are being unduly taxed, they should strongly consider hiring a property tax lawyer. By presenting legal guidance and representation, a property tax lawyer can prove to be an invaluable resource when it comes to handling property tax matters.
One way that a property owner can indicate their need for professional legal services is when they receive a substantially higher property tax bill than they have in the past. Texas property owners are often at the mercy of their local appraisal district regarding how much their properties are assessed for tax purposes. A sudden increase in what their property is valued at can lead to drastically increased property tax bills. However, if the value of the property has not increased, then this higher tax bill may be the result of a property appraisal district error. A Texas property tax lawyer can assist with researching the law and the assessed value of a person’s property to determine if the appraisal district has made a mistake in their assessment .
Another scenario where a property tax lawyer can be beneficial is when a property owner receives notice from the appraisal district stating that their property is going to be acquired by a local government entity, such as a city or county. If their property is acquired, the property owner will receive compensation for the taking of the property and will receive their tax bill for the remaining value of their property. Although this statement appears to be fair, it is often not. If the property owner is looking to receive maximum compensation for their property, then they should seek the services of a Texas attorney who can help them understand and navigate the Texas condemnation process.
When a property tax dispute occurs, litigation might sometimes become drawn out, with the justification of property taxes being repeatedly challenged. When this situation occurs, a property owner will be able to benefit from the expertise of a Texas property tax lawyer in understanding the legal issues surrounding the prolonged litigation. When a lawsuit drags on for years, the cost of the ongoing litigation may outweigh the benefits of challenging the amount owed by a property owner. However, a good property tax lawyer can help evaluate whether a property owner’s fight is worth it.