Property taxes can make a significant difference in affordability for Austin home buyers. Tax rates range from about 1.7-3.4% (varies by neighborhood) of your home’s assessed value. Depending on your home’s assessed value, annual property taxes in Austin can be anywhere from a few thousand dollars to tens of thousands of dollars per year. Because that makes such an impact on your monthly payment, most buyers want to get an estimate of what property taxes would be if they purchased a certain home. The question is, how accurate are the online estimates?
How Accurate are Austin Property Tax Estimates?
The answer is two fold. The tax rates are generally accurate on the portals (AustinHomeSearch.com, Realtor.com, Trulia, Zillow), but the Estimated Taxes or Actual Taxes might not be. Here’s why…
Property Tax Rate is Public Record
The property tax rate is pre-loaded from the public tax record. The tax rate is what is used to calculate your property tax assessment against your home’s assessed value. The catch-22 here is the tax rates are usually hard to find on the portals. They like to only show Actual Tax amounts.
Where Can I Find Property Tax Rates?
Our Austin home search tool shows them. When you click on a property, school down to “Additional Details” and look for a field that says “Tax Rate”.
Actual Tax Amount Can be Misleading
The Actual Taxes or Last Year’s Taxes are what the current owner is paying. Most of the portals give the actual tax value and a history of the property taxes paid. The Actual Tax can be misleading because it makes it seem like that will be what you’ll pay as the owner of the property, which is not always true.
Actual Taxes Factor in the Homeowner’s Exemptions
There are several exemptions that will reduce your property tax liability. The most popular are the Homestead Exemption (primary residences), Over 65 Exemption (for seniors) and the Disability Exemption. If a homeowner qualifies for all three exemptions, for example, their actual property taxes will be reduced by a considerable amount. If you qualify for none, you will pay more.
Certain Exemptions Cap Assessment Increases
The Homestead Exemption, for example, caps the assessed value increase to 10%/year. That doesn’t mean your assessed value automatically increases by 10% each year. It increases and decreases with the market. If your value increases and you have a Homestead Exemption filed, it can only increase by a maximum of 10%, even if the market showed an increase greater than 10%. If you purchase a home that has been owned by the same owner for decades, they likely will have a much lower valuation and therefore a much lower “Actual Tax” paid yearly.
Tax Assessor Can Re-Assess Your Valuation After Ownership is Transferred
Think of this as essentially hitting clear on your calculator and starting from scratch. Texas is a non-disclosure state, so theoretically the County Tax Assessor should not have access to what you paid for your home. But, they do have the right to re-assess your home’s value when a property changes ownership. If you bought a house with a low valuation, and most of them are when you compare it to sales prices in the last year or two, you’ll likely have a surprising property tax bill if you were using the Actual Tax numbers as property tax estimates.
Exemptions are Wiped at Transfer of Ownership
The tax assessor will also remove all exemptions from the property when it changes ownership. You will be able to file for your exemptions between January and April of the year after you purchase the property. But, if you don’t qualify for the same exemptions the previous owner had, your property taxes might be significantly more than you anticipated.
Case Study: The $1.2MM House with $11k Tax Bill
Just doing some quick math, you know those numbers don’t work out. $11k is more of what you’d expect to pay in property taxes on a home that’s ⅓ the value of this one, but, you’d be surprised how many buyers would say with excitement “property taxes on this house are only $11,000!” Why were the Actual Taxes so low for this house?
This home was assessed for $450k the previous year. During that time, it was converted from a duplex that was falling down to a luxury single family home and is now worth about $1.2MM. For buyers who rely on Actual Tax figures and bank on an $11k tax bill, that $30k tax bill is going to be a big shock when it comes in the mail next year.
How Do You Get an Accurate Representation of Property Taxes?
We always recommend our buyers use the property tax rate to estimate what their taxes would be. I wouldn’t factor in any exemptions. Simply multiply the tax rate by the price, so you get a worst case estimate. If your property taxes are lower, great! In Austin, you can expect the tax rate to be about 1.7-3.4% of the assessed value depending on the neighborhood. If you see numbers that don’t fit within this range, a red flag should go up.
Considering Buying a Home in Austin?
We know the Austin area better than any other Realtor and can help you find the best home at the best price. For more info about our team, check out our Austin Home Buyer section. Then, call us at (512) 827-8323, email us at info@11OaksRealty.com or fill out our Buyer Survey to get started.