Texas Property Taxes

Marc Kurth

I promised to revisit this topic for the curious! Texas has a lot going for it, in my view, but property taxes are not one of them. You can live cheaply in a small home in the woods, but you have to choose the location wisely!

 Texas has no personal income tax, so they make up the revenues with high property tax rates. The rate varies by county, and more importantly by school district in that county – because the schools are the biggest part of the bill. In general, annual property tax rates are around 1.1%-2.4% of the appraised value. The school portion is 65%-80% of the total, but it can be a bit lower or much higher depending on the district.

You can file for AG/Wildlife exemption on acreage, which is a very, very low tax rate.

Texas has a “Prop 13” type rule, but it allows up to a 10% increase per year.

At 65 years old, you can freeze the school portion of the tax bill.

At 65 years old you can stop paying the taxes and they will be collected when you vacate the property, but you cannot be evicted for taxes.

Like so many other areas, property values are rising fast with an influx of CA equity money turning the local market sideways.

My situation:

When we left California in 2008, I didn’t mind the high property taxes because the net impact put me way, way ahead because of the high personal income taxes I was leaving behind.  Well, that was when I had a great paycheck coming in from Sun Edison. When they collapsed in 2009, the property taxes kept marching on, but the tax savings stopped along with the fat paychecks!  We intentionally invested in a high growth area about 45 minutes outside of Austin, so we stayed in that house for 9 years watching the value increase while we grew the new business.

 I knew that I did not want $14K to $16K/year taxes as I got older, so at 64 years old, I sold the big custom home to an incoming Californian with wads of equity money. We rented an apartment here at the lake for 5 months while we shopped for a home and a new office/warehouse for my business. At the advice of the local tax office, we bought a beater-fixer-upper with a low appraised value but great potential. Then I froze the taxes and went to town on it!  My “freeze” value taxes are $4,300./year in lieu of over $13,000. next year without the freeze. That spread will continue to widen each year until the next crash. The sad part is that my kids will have to sell it when we are gone because the taxes will revert to full value. 

 A neighbor who lives 90 minutes away in Dallas, owns a weekend home here. It is a modest home but he has a lot of waterfront. He paid $197K in 2017, so his tax bill was about $3,000. Per year. Now the county has appraised it at $1.9 million with a tax bill of $31,000. Per year. The big homes across the cove from me are paying $150K to $250K per year in property taxes and these are part time weekend homes. Big money from Dallas.

Dave Angelini

Thanks Marc for posting this. It will probably save my brother (still in Cali) who is undecided on here and there.....

littleharbor2

Unbelievable! Owing a quarter million a year in taxes has to leave you feeling the state actually owns the property, not the payee.

Marc Kurth

Dave Angelini said:

Thanks Marc for posting this. It will probably save my brother (still in Cali) who is undecided on here and there.....

Well, timing is everything.

California discovered Texas 8-10 years ago and then the roller coaster ride started cranking up 4-5 years ago. The property values were so super low that people were buying 1-2 homes for cash, with their equity. The tsunami was triggered and home values that previously changed very little in 10 years, suddenly doubled and then tripled in 3-5 years because they were still cheap compared to the Left Coast.

Years ago the "escape migrations" were to Seattle, then Salt Lake City, then came Texas, and Florida. Now I see Idaho drawing a crowd. I am willing to bet that next up will be parts of Oklahoma, Missouri, and Kansas.

Sometimes it is like locusts who destroyed their fields and move on to the next. Some of us moved in order to have a better life!

Marc Kurth

littleharbor2 said:

Unbelievable! Owing a quarter million a year in taxes has to leave you feeling the state actually owns the property, not the payee.

To me, it is incredibly unbelievable, but I live in the cheap seats and I'm OK with that!

Photowhit

No, no!

Cheap seats are here in Misery(Missouri) 3 acres, setup 2000 model 16x60 mobile home. $230 a year in taxes...(Purchased at the end of housing crisis 2011 for $12K and even then I was offered $18K the day I purchased, seller had to sell quick to qualify for a home with fiancée) I could sell Personal property tax about $25 on my 15 year old Scion Xb and 5x8 trailer, Income tax pretty minimal, but I have made any real money since the 90's, not sure I even paid more than $100 on $25K income about 10 years ago.

...and I'm worried about Missouri Supreme Court declaring tax exempt status of solar electric systems unconstitutional, at least for commercial solar farms leasing property.  On install it was tax exempt, I'm not planning on asking...

Missouri Halts Solar Tax Break as Federal Incentives Expand (usnews.com)

Ralph Day

Oh 'whit, just a little more lemon juice on the paper cut please! 

littleharbor2

Marc Kurth said:

littleharbor2 said:

Unbelievable! Owing a quarter million a year in taxes has to leave you feeling the state actually owns the property, not the payee.

To me, it is incredibly unbelievable, but I live in the cheap seats and I'm OK with that!

From the beautiful photos you have posted over the years it would be hard to convince me you're in the nosebleed section.

BB.

One question on the Texas 65 yr old property tax freeze... Was the difference (say now $3,000 per year and $10,000 somewhere in the future, and freeze until death)... Does that $10,000 per year "freeze"--Just $3,000 per year taxes--Does that mean that $7,000 per year go into the "tax kitty" until "death/sale" and owe 10 years * $7k difference = $70k in "past tax kitty due", or do taxes just "jump" to present tax rate (i.e., new owner pays $10k per year--Or whatever--Current tax rate is)?

People do need to remember that Prop 13 (California) was a last ditch attempt to put limits on California State Government spending and not just to give property owners a "gift". There had been multiple attempts in the past to limit government spending before--And the politicians always found a way around those limits... Roughly 1.25% Property tax on last sale price and 2% per year max valuation increase. Before, people could "inherit" the parents'/property owner's prop 13 valuation. But new laws have seriously limited the ability to "pass on" the lower valuations.

If you have a government that is set on spending huge amounts of money for the latest gov project--Revenues are going to be raised (via bonds, or income, property, fuel, parking, fines, special fees for new construction, etc.).

-Bill

Marc Kurth

Bill,

No sir. The taxes do not accrue to be settled later, they are simply discounted and therefore not owed. Upon selling/gifting the property, the current "normal" tax levels apply to the property. I do not have to occupy the property to qualify, just be at least a 50% owner. You can only use it on one property at a time, but you can change any time. It is common to see people using the freeze exemption on a weekend place when the value exceeds their primary home.

The lowest property rate applies when you get an Agricultural exemption. My BIL for example lives on 40 acres and has a tax bill of $200.00/year for 39.5 of the acres. He raises some goats, sheep, chickens, geese, etc.  The AG exemption applies to all but the area immediately surrounding the house. He pays $ 825./year for the 3-bedroom house appraised at $75K.

BB.

Interesting Marc... Is the frozen valuation based on "today's" (or whenever in the future) property valuation, or go back to the price/valuation when purchased?

It sounds like Texas uses current "sales price" as valuation--I believe other states have some sort of discounted valuation(s) formulas so that x.xx% tax rates does not always apply to the "true property" value.

-Bill

Marc Kurth

Bill, The value is frozen at the county appraised value at the time of filing for the exemption. Generally, the county appraisals are actually below the real market value by 10% to 15%. Yes, they are supposed to be market value but they avoid a lot of arguments by staying a little low. You can contest their appraised amount and they will back it down if you have enough comps to make your case.

It is only becoming an issue now because we are seeing California style market runups. I asked our chief appraiser what their plan is for when the inevitable correction occurs. The response was "We don't know. We have never seen this before."

However, our county did recently drop the rate by 28% to help offset the radical increases in market value.

JRHill

littleharbor2 said:

Unbelievable! Owing a quarter million a year in taxes has to leave you feeling the state actually owns the property, not the payee.

Try not paying the taxes and you'll find out who really owns it. We are all tenants. Sorry for the bad news.

Wheelman55

Our part of Texas actually “went a little high”. Me and all of my neighbors saw appraisal values go up 7.5 to 9.5 times. 

We all complained to little avail. 

We are in Brewster county. The county has less than 10,000 people. Brewster county has no oil/gas revenue.

I met with the number 2 person at the county. She informed me that Austin (that’s the state capital for you non Texans) mandated that the county send them an additional $3.5mm in tax $$ in 2023. So property values had to go way up. 

Another pain point is schools. We have few school age kids in the county. So a big part of the taxes that could go to local schools end up going to oil/gas rich counties. The oil/gas rich counties have little tax revenue due to the low tax rates on property, however these counties have high personal income which is not taxed. 

Our county has low personal income and now jacked up property values which do get taxed. 

It is a bit of a mess. 

JRHill

When I moved to WA from midwest ranch land I had to reinvest sale proceeds. I bought some forested land and one of the parcels was enrolled in WA's forest reproduction program. 80% of that parcel had been clear cut 12 years previous and the owner had initiated the program. I really didn't understand the whole thing until the sale was done. I thought "Heck no" and requested to remove its tax status. Then I got the education. The land taxes were not depreciated - they were differed. Even across ownership. To remove that parcel meant I would have to go back and pick up the tab for the 'deferred' taxes to the time it was enrolled. Oh, NO! that was not acceptable and a huge bill on non income producing land. We built from scratch anyway...

There are all kinds of programs and of course they vary state by state. Some might work for you - others might take you to the cleaners.

So what did I do? I enrolled EVERYTHING in the program including a few more acres. Bwahhhahh. It cuts out 5 or 7 acres on improvements and every thing else is "in the pogram."

To be fair, the emphasis is for land owners to restore the land and there are documented milestones. I like that. And you can actually get a cash pay out for restoring your own land, if you participate, and you will pay taxes on the payout. And you will pay taxes on a future harvest. But until my heirs try to unwind this thing we are good.

One thing is for sure, the gov't owns the land. They set the rules and you need to know them.

BB.

Yep--Agree with comment about how to find out who really owns your property by not paying the property tax for a year or so.

We are trying to figure out how to help our two kids stay in the San Francisco Bay Area... It was not great 35+ years ago when we got married and looking for our first home. Today-- Property Taxes (if purchased today) on a simple 2/3 bedroom 70 year old home on 5,000 sqft lot are roughly 1/2 the cost of rent on a simple 2/3 bedroom apartment (and that is before before mortgage payments on sky high property prices).

Almost in the same situation as my parents were back in 1978 with a paid off home and losing it to property taxes when they voted for Prop 13 and were able to retire in place until they died.

I had read before about the property tax issue in Texas... Not fun.

-Bill

JRHill

Bill, it goes further. Anything titled is actually owned by the authority that issues the title Gee, is that a surprise, legally?. Many years ago I went through this and I determined it to be true: the authority that issues the title owns the asset.

Your rig? You can choose not to drive it on a fed/state/county road. But you can not remove your land.

So I'll just go back to discussing lithium batteries.

I really like my SimpliPHIs.

Marc Kurth

Wheelman55 said:

Our part of Texas actually “went a little high”. Me and all of my neighbors saw appraisal values go up 7.5 to 9.5 times. 

We all complained to little avail. 

We are in Brewster county. The county has less than 10,000 people. Brewster county has no oil/gas revenue.

I met with the number 2 person at the county. She informed me that Austin (that’s the state capital for you non Texans) mandated that the county send them an additional $3.5mm in tax $$ in 2023. So property values had to go way up. 

Another pain point is schools. We have few school age kids in the county. So a big part of the taxes that could go to local schools end up going to oil/gas rich counties. The oil/gas rich counties have little tax revenue due to the low tax rates on property, however these counties have high personal income which is not taxed. 

Our county has low personal income and now jacked up property values which do get taxed. 

It is a bit of a mess. 

Are you saying that your appraised value is way off from the actual market value, or that they are playing catch up?  Back in 2016/17 the state did an audit and found that very few counties were appraising at actual market values. They simply mandated that the counties bring their appraisals in line with actual market values.

The state laws are really clear about this, and you will not lose an appeal if you properly present proof of inaccuracies. We had a LOT of people requesting hearings and then showing up with nothing more than a statement that "this is too much."

We have no oil/gas business here either. You pay your property taxes to the county and they give the school districts their money. The property tax rates are higher in high-income counties. Brewster has a very low tax rate (1.01)% but also a very low medium income, so it works out to about 2% of the "average" resident's income. It's all about how efficiently the school district runs!

It is my personal opinion that property taxes should not exist, but our founding fathers felt differently!

BB.

Originally in the US, only property owners could vote--They had "skin in the game".

https://politicalpistachio.blogspot.com/2012/04/at-founding-of-america-only-property.html

https://checkyourfact.com/2019/10/08/fact-check-alexis-tocqueville-american-republic-congress-bribe-public-money/

An internet search revealed that it may actually be a variation of a statement frequently misattributed to Scottish academic and author Alexander Fraser Tytler. He is credited with saying, “A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury.”

-Bill "anyway" B.

Wheelman55

“Are you saying that your appraised value is way off from the actual market value, or that they are playing catch up?  Back in 2016/17 the state did an audit and found that very few counties were appraising at actual market values. They simply mandated that the counties bring their appraisals in line with actual market values.”

The appraisers are mostly using property listings for their valuations. 

We are off grid: no electricity, no water, no sewer, no pavement. 

A small handful of very artsy air BnB’s sold for a lot of money. These were all on grid. We have a local realtor who is listing off-grid properties for nose bleed money. Nothing is selling at those prices, however the bureaucrats point to the listings as support for the high prices. 

Yes there was the mandate to get values up to market. The issue lies in how they are doing it. Their initial appraisal for our one room building in Terlingua was 1.5 times the value of our house in Minneapolis, which is in an upscale neighborhood. 

We got them down from there, however not as far as we would like.  

More on the school funding later. Our county does send some of their school money back to the state. 

Marc Kurth

BB. said:

Yep--Agree with comment about how to find out who really owns your property by not paying the property tax for a year or so.

We are trying to figure out how to help our two kids stay in the San Francisco Bay Area... It was not great 35+ years ago when we got married and looking for our first home. Today-- Property Taxes (if purchased today) on a simple 2/3 bedroom 70 year old home on 5,000 sqft lot are roughly 1/2 the cost of rent on a simple 2/3 bedroom apartment (and that is before before mortgage payments on sky high property prices).

Almost in the same situation as my parents were back in 1978 with a paid off home and losing it to property taxes when they voted for Prop 13 and were able to retire in place until they died.

I had read before about the property tax issue in Texas... Not fun.

-Bill

Bill, Concorde now has a factory in the Atlanta area for that reason. It is a family-owned operation and they do care about their kids/grandkid's future. The Lifeline branch of the company now has a distribution center in a great rural area out west of Fort Worth and there was NO problem getting employees to move from the LA area!

Marc Kurth

littleharbor2 said:

Marc Kurth said:

littleharbor2 said:

Unbelievable! Owing a quarter million a year in taxes has to leave you feeling the state actually owns the property, not the payee.

To me, it is incredibly unbelievable, but I live in the cheap seats and I'm OK with that!

From the beautiful photos you have posted over the years it would be hard to convince me you're in the nosebleed section.

Well, as they say: Location, location, location. The house is coming along, but we have a ways to go! I'll post some progress pictures.

Dave Angelini

Brrrrr   !   Looks like another repeat of winter 2021 down your way Marc.  Hopefully they did the maintenance this time and learned some lessons.

I found out that my Brother will not have to pay as much tax down your way as he is retired US Navy. He flew in the last F4 squadron and thru F14 into the Super Hornet.  Can you comment on property tax for the military?

He has not decided if he wants the summer heat and humidity of Texas or the Winter snow of northern Nevada.  He lives/works in San Diego now. He knows he has to get out.

Merry Christmas to all ! 

Dave Angelini

Bumping this thread again.  

Brrrrr   !   Looks like another repeat of winter 2021 down your way Marc.  Hopefully they did the maintenance this time and learned some lessons?

I found out that my Brother will not have to pay as much tax down your way as he is retired US Navy. He flew in the last F4 squadron and thru F14 into the Super Hornet.  

Can you comment on property tax for the military in Texas?

He has not decided if he wants the summer heat and humidity of Texas or the Winter snow of northern Nevada.  He lives/works in San Diego now. He knows he has to get out.

Marc Kurth

Dave,

I am not up on the details but it is my impression that the property exemptions apply to disabled veterans. The percentage of disability relates directly to the exemption percentage. I have met several people who told me that they pay no property tax in Texas due to their military service disability.

Dave Angelini

1000+  traps on a floating deck.  He is disabled for sure!  Thanks for checking !  Raising a glass to you tonight!

Marc Kurth

Bringing back an old thread with an update.

Texas has been shifting more of school funding away from property taxes. Since schools are the bulk of the total bill, this is reducing tax bills. Our annual property tax bill has decreased from around $5,500. to $2,700. now. Being over 65 years old, they are frozen at that amount for as long as I own the home.(They can go down, but not up) If I decide to move to another Texas property, I can apply the same "percentage of reduction" to my next home. 

The county keeps raising their appraised value so now I am now paying 30% of the unfrozen amount. So I would pay 30% of whatever the standard property tax bill on the new place. Obviously this differential will grow larger as the county appraises home values higher and higher. This is a handy feature if I decide to downscale and remain in Texas.

So far, my plan is stay here in the cheap seats and enjoy the weather which has been in the 70s and 80s for the last several weeks and the pattern should continue.

Dave Angelini

That is a good direction.  Thanks Marc !  My brother is still up in the air on there or Nevada. I keep telling him
it is either the humidity or snow for a couple months in winter.  Cheers!

Marc Kurth

Dave, 

Texas now has four of the top ten metro population areas of the US. Dark forces with deep pockets are at work to turn Texas and the odds are in their favor. The tipping point is near and they will eventually win. Nevada may be better over the longer haul! I am seeing folks leaving Texas and going to rural areas in eastern Oklahoma or western Arkansas. Land and housing costs are up everywhere but apparently not nearly as bad there. I have done it before and there is an attraction to living in a thick forest.

For now I'll sit and watch the ice melt that formed when I poured a 35F IPA into -10F mug. It converts back quickly at today's 88F ambient, but deserves contemplation. It's only 3:00 PM here, but it's five o'clock somewhere!

Marc

JRHill

I have two step sons, my son and all their families in various TX. One just moved back for is job and bought a house (not new) and the other sold their city place and bought a few acres of open land. My son is looking to get out of San Antonio if he could find a place in the outskirts to build that wouldn't match the federal deficit.

They all love TX and I respect the State as well. But my gosh - you have to pay to live there relative to the RE tax thing for sure. But it seems millenials don't do a lot of research. My wife spent plenty of years stationed there while in the military and she loves Tx too. In the day when we get driven off our off grid place in WA due to age she has the upper Gulf coast as a goal. Who am I to argue? She mostly wins. And I would fit right in but I talk funny being from Nebraska.

I like TX, esp if NE beats them in a game.

Marc Kurth

When I bailed out from CA and moved to TX in 2008, the lack of personal income tax here far out weighed the higher property taxes. At the time, I was $800./per month ahead with the higher property taxes vs. zero personal income tax in TX. I was happy to pay the higher property tax rate. The overall cost of living was also lower.

Around 2012 or 2013, property values in popular parts of Texas started climbing at historic rates. Now property values are skyrocketing so much that the spread has reduced and then vanished. We sold our really cool home in the woods specifically because of that. In 2018 I was coming up on 65 and did not want to freeze the taxes at $12,000. per year.

If I were leaving CA with that wad of equity, I am not sure where I would want to move. I do love many aspects of Texas and I am not in a hurry to leave.

Marc