Who determines how much taxes property owners should pay? How are these property taxes determined? This article will try to answer these questions, especially for Texas property owners who want to understand the basics of Texas’s property tax system, but who do not appreciate having to decode pages of legalese in order to do so.
As it happens, Texas does not charge income tax, which is good news for the disgruntled, overtaxed employees looking for a place to relocate. However, this tax-free status for wage earners is also probably why, in order to meet revenue targets, the local government relies heavily on property taxes instead. The unfortunate result? Texas has since been catapulted into the top 10 of a list of states with the highest property tax, according to rankings by credit scoring company, WalletHub. With an effective real estate tax rate of 1.93%, Texas ranks fifth place out of 51 other states in America, with the top biller, New Jersey, at 2.29%.
Add to that the recent noise over the so-called “hidden property tax” for Texas property owners, and any concerned individual might get a little in over their heads.
So to shed a little more clarity, here are terms a Texas property owner should know.
A county appraisal district, or CAD, managed by a chief appraiser, is in charge of determining the value of—that is, appraising, the properties within the CAD’s designated county.
An appraisal review board (ARB) mediates between the CAD and property owners. The ARB’s job is to settle disputes, determine exemptions, and other property tax-related issues, with the goal of formalizing the final value of taxes to be paid.
Taxing units are local government units legally authorized to impose and collect property taxes. School districts are examples of a taxing unit, while a school board, on the other hand, is an example of a taxing unit governing body. Taxing unit governing bodies set the budget for a taxing unit, like a school board determines how much money a school district needs, for example. The tax rate will then depend on how much budget a taxing unit needs.
Finally, the taxable value set on a property based on its appraisal, plus the tax rate determined by the taxing units, combined, will determine the total amount of taxes that property owners must pay.
In our next article, we will discuss these entities and what they do in a little more detail.
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