For Austin luxury homebuyers, navigating property taxes can feel overwhelming, but understanding the basics can make a significant difference in managing costs and planning effectively. Property taxes in Texas are a crucial aspect of homeownership, especially as tax assessments and bills continue to rise annually, posing a financial challenge for many. This post aims to provide a comprehensive guide to help Austin luxury homeowners grasp the fundamentals of property taxes, exemptions, and strategies to estimate and potentially lower their tax burden. While this information serves as a helpful starting point, it’s essential to consult with your county appraisal district, a CPA, or a financial advisor for personalized advice based on your specific circumstances. Here is everything Austin luxury home buyers need to know about Austin luxury home property taxes.
What Will My Property Taxes Be if I Buy this Property?
What will my taxes be if I buy this property is one of the most common questions I get from our Austin luxury home buyers. The short answer is there is no way to precisely predict what your property tax bill will be on a house you buy. Assessments and tax rates change every year and you won’t have both numbers until about October. Plus, the assessor can reassess the property when it changes hands, and they won’t tell you what they’ll reassess it for until after you own it.
With all of these unknowns, it can be difficult to put your finger on exactly what your property tax bill will be. There are a few numbers online that often confuse (and honestly sometimes mislead) luxury home buyers. We’ll go through why you can’t rely on those as well as what you can rely on to most accurately predict your property tax bill.
Everything Austin Luxury Home Buyers Need to Know About Property Taxes
Before we dive deep into property tax estimates, exemptions and reducing your tax liability, we’ll start with some basics about how and when the county tax assessor can change the assessed values and why you can’t rely on current property tax estimates posted on the property listings to get an idea of what your property tax liability will be.
Texas is a Non Disclosure State
MLS sales data for Texas property sales cannot be shared online without it being behind a password portal. They say this helps hide sales data from the tax assessor, forcing them to use other methods to estimate a home’s assessed value. The theory is this keeps assessed values lower. For the most part that is true, but with the recent rising property assessments in a steady and/or declining market, the jury is out whether or not that is really the case.
The Tax Assessor Can Reassess a Home’s Value After It Changes Hands
When the property changes hands a deed is recorded at the county, making it public record. That triggers the County tax assessor to reassess the value of the property. That being said, if the previous owner lived there a long time and had a homestead exemption (which caps the amount the assessor can raise the value of the property each year) it is likely the assessed value will increase significantly when it is reassessed. Not always, but in the last several years, that is very likely. Therefore you have to assume the assessor will increase the assessed value of the property to somewhere closer to what you paid for it if the current assessment is way less than the purchase price.
Two Property Tax Data Fields from MLS You Can’t Rely On
In the property’s listing, you’ll see two fields in the property tax section, Current Taxes and Estimated Taxes. Both are unreliable. Here’s why.
You Can’t Rely on The Owner’s Current Taxes to Estimate Your Property Taxes
Though the owner’s current taxes are posted online, you cannot rely on those to estimate what your taxes would be. Their current taxes are based on their exemptions and the assessed value of the property today (which factors in their exemptions, how long they’ve owned the property, etc). Even if you plan to file the same exemptions as they have, the assessed value will likely change when the property changes hands, which will change your property tax amount.
You Can’t Rely on Estimated Taxes to Estimate Your Property Taxes
There is another box labeled “Estimated Taxes” you’ll see online. This box is an input box on MLS and listing agents can put any estimate in there. They could say property taxes are $5,000 when they’ll be $35,000. So basically garbage in, garbage out is how I look at that box. It’s not reliable.
The Overall Tax Rate is Your Best Tool to Estimate – And Again There is Uncertainty
Given the tax rate is not set until August or September for property taxes due in January, the tax rate you’re using to estimate your property taxes may or may not be the same as the property tax rate you’ll have when taxes are due. If you buy a house in June and use the previous year’s tax rate to estimate your taxes and the tax rate changes in August when it is set, your property tax amount will change.
Over the past few years we have seen tax rates actually go down, so if you estimated on last year’s rate and they went down, you’d pay less than expected. But, that isn’t always the case. They can go up or down.
All of that being said, multiplying the tax rate by the purchase price is the best way to get a high estimate for your property taxes. Typically exemptions and lower valuations can reduce them, but this high estimate gives you the maximum amount they could be so you can budget.
For an even more accurate estimate, you can find out the taxing entities on the property you’re interested in and see what their reductions are for the homestead exemption (or any other exemptions you might qualify for) and calculate each entity’s tax separately. Remember the homestead exemption gives you an automatic $100,000 reduction of your assessed value for school taxes. The other reductions vary, so you’ll need to reach out to the taxing entities to see what their current homeowners exemption reduction is.
If you get a high valuation from the county (higher than what you paid for the property) when the tax assessor reassesses the property, you can protest and have a good case for a value reduction to what you paid for the property. Thus, multiplying the tax rate by the purchase price is the best way to get a high estimate for your property taxes. You have the protest and your closing statement as a backstop.
Travis County Has a Property Tax Estimator But with Many Disclaimers
Travis County has a property tax estimator calculator on their website. You can check it out here. Before you can use the calculator, you have to agree to their disclaimer that basically says there are no guarantees your property taxes will be the number the system generates. If the county that issues these bills can’t even generate a reasonable estimate, we know it’s really not possible for the rest of us to nail down that number.
This calculator does factor in the homestead exemption (if you qualify) but it doesn’t factor in any tax ceiling of freezing that would happen with the Over 65 of disability exemption. Nor does it factor in any reassessment that will happen when the property sells. You can put in each taxing entity the property is subjected to, so you can get a little closer estimate than simply multiplying the tax rate by the purchase price. However, again, this calculator will not take into account any reassessment when the property changes hands, so use with caution.
Reducing Your Tax Burden: Know the Possible Exemptions and If You Qualify
As assessed values increase, property taxes are becoming an increasing amount of a home owner’s expenses. Exemptions are the best way to ensure your property tax bill is as low as you can get it. Below we’ll explain the most commonly qualified for exemptions so you can determine which, if any, you qualify for. Then we’ll dive deeper into some more specialized exemptions for larger parcels. The five common types of exemptions below will apply to nearly every home in Texas if you qualify.
Common Types of Property Tax Exemptions
Texas offers several exemptions to help homeowners manage property taxes more effectively. Here’s a closer look at the most common ones that could apply to you.
1. General Residence Homestead Exemption
Who it’s for
Homeowners who own and occupy their property as of January 1st of the tax year. You must reside at the property as your primary residence and not claim any other property, in or out of state, as your primary residence.
In limited situations, you may be able to file the exemption at your move-in date if the previous owner did not have an exemption on the property and the new owner is not already claiming a tax exemption for that year.
Benefit – Reduction in Assessed Value
This exemption provides tax savings by reducing the overall assessed value of your home. School districts in Texas are required to offer a $100,000 homestead exemption, and some taxing entities may offer additional reductions.
Your school taxes will be calculated as if your home is worth $100,000 less than what it is assessed for.
Note school taxes are only a portion of your overall tax rate. If the tax rate is 1.8%, school taxes might make up 1.1% of the bill. They are typically the greatest portion of your tax bill, so the reduction is sizable.
Other entities (cities, MUDs, hospital districts) can offer a reduction with a homestead exemption, but with thousands of these entities and each offering a different amount, it’s impossible to make a blanket statement how much the reduction would be.
Benefit – Cap on Yearly Assessment Increases
A homestead exemption will also put a cap on the amount the tax assessor can increase the value of your assessment every year at 10% plus the value of any improvements you made in the past year.
In markets that are appreciating, like Austin, the cap can significantly lower your assessed value over time.
How to apply
Submit a completed application along with a driver’s license or state-issued ID showing the same address as the property. (So make sure the address on your license is changed to the property address pretty immediately after the purchase.) If the exemption is postmarked (or e-filed) by April 30th of the tax year, you’ll see your savings on the property tax bill that comes out in the fall.
If after, and you were eligible to claim the exemption for the current year, the exemption will be applied retroactively if you file up to one year after the tax delinquency date (typically February 1 of the following tax year).
2. Over 65 and Surviving Spouse Exemptions
Who it’s for
Seniors aged 65 or older and, in some cases, their surviving spouses aged 55 or older who continue to own and occupy the property.
Benefit
This exemption offers both a reduction in taxable value and a tax ceiling for school taxes, which means your school taxes won’t increase as long as no significant improvements (like a pool or garage) are added to your home.
Additional perks
If you move to a new home within Texas, you may transfer the tax ceiling to your new property.
How to apply
Provide proof of age (a valid ID) and submit your application online or in person. Surviving spouses will need proof of age, proof of marriage, and their late spouse’s death certificate.
You can apply on the date you qualify. You don’t have to wait until the following year. The exemption will be applied retroactively if you file within a year of turning 65.
3. Disabled Person Exemption
Who it’s for
Individuals with disabilities as determined by the Social Security Administration (SSA), or those receiving disability benefits under the Federal Old Age, Survivors and Disability Insurance Program.
Benefit
Similar to the over 65 exemption, this reduces your tax burden and freezes school taxes at a fixed amount. Additionally, you can transfer your ceiling upon moving to a new residence.
How to apply
Submit your application along with an SSA disability determination letter.
You can apply on the date you qualify. You don’t have to wait until the following year. The exemption will be applied retroactively if you file within a year of becoming disabled.
4. Disabled Veteran and Surviving Spouse Exemptions
Who it’s for
Veterans with a service-connected disability rating of 10% or more and their surviving spouses.
Benefit
Exemptions vary based on disability percentage but can reduce your taxable home value by up to $12,000 or eliminate it entirely if you have a 100% disability rating.
How to apply
Submit an application with documentation from the Department of Veterans Affairs verifying your disability rating.
5. Surviving Spouse of a First Responder or Armed Services Member Killed in Action
Who it’s for
Surviving spouses of first responders or members of the armed forces who were killed in the line of duty.
Benefit
This exemption provides a 100% reduction in taxable home value, ensuring you owe no property taxes on your residence.
How to apply
Provide documentation, such as a marriage license and a Report of Casualty, along with your application.
How to Apply for Property Tax Exemptions
Applying for one of the above listed property tax exemptions in Texas is straightforward if you know the steps to follow.
- Review eligibility requirements
Ensure you meet the qualifications for the exemption type(s) you’re applying for.
- Complete the application form
Visit the Travis County Appraisal District, Williamson County Appraisal District or Hays County Appraisal District to download the appropriate application form(s).
- Submit necessary documents
Attach proof of residency, age, disability, or other required materials based on your exemption type.
- Choose a submission method
Applications can be submitted online (in most counties), by mail, or in person at the following address:
- Travis County – 850 East Anderson Lane, Austin, TX 78752
- Williamson County – 625 FM 1460, Georgetown, TX 78626
- Hays County – 21001 North IH 35, Kyle, TX 78640
- Wait for approval
Action on your application typically occurs within 90 days, and you’ll be notified if more information is needed or if your application is denied.
Do You Need to Reapply?
Generally, you only need to apply for an exemption once, unless your circumstances change. For instance, you’ll need to reapply if you move to a new home or if the appraisal district requests updated documentation during its periodic audits (typically every five years).
How These Exemptions Affect Your Property Taxes
Property tax exemptions reduce the taxable value of your home, which directly lowers your annual tax bill. For example, if your home’s market value is $1,000,000 and you qualify for a homestead exemption, your taxable value for school taxes drops to $900,000.
Additional exemptions (e.g., for seniors or veterans) further reduce taxable value, making tax bills even smaller. Over time, this can result in thousands of dollars in savings.
Digger Deeper: Agriculture, Wildlife, and Timber Management Exemptions
Texas provides property tax relief through special appraisals for certain types of land use, including agriculture, timber production, and wildlife management. These exemptions assess your land based on its productive capacity rather than its market value, often leading to much lower property taxes.
These exemptions are the hardest to qualify for and must be maintained with supplemental documentation, sometimes yearly. Though they are much more involved, they provide landowners with the highest property tax reduction available. Here are the highlights.
Note: These exemptions typically require acreage and are not available for homes in a traditional subdivision. Some Austin luxury neighborhoods with ranch size parcels, like Preservation Ranch, have the Wildlife Exemption already in place. In Preservation Ranch, the exemption is managed by the HOA, so homeowners get the benefits of the exemption (significantly lower property tax bills) without any of the hassle.
Agriculture Exemption in Texas
The Agriculture Exemption allows land to be appraised based on its productivity value instead of its market value, which can result in substantial tax savings. Here’s what you need to know:
Who Qualifies?
To qualify for an Agriculture Exemption:
- Primary Use: The land must be principally used for agricultural activities like cultivating soil, growing crops, raising livestock, fish, poultry, or producing commercial products like honey.
- Historical Usage: The land must have been used for agriculture for at least five of the past seven years.
- Degree of Intensity: The agricultural activity must meet the standard operations intensity commonly accepted in the surrounding area.
The exemption extends to:
- Land used to raise exotic animals or birds for commercial products.
- Land used to cut timber for agricultural purposes.
- Idle farmland under government crop rotation programs.
How to Apply
- Complete Form 50-129 (Application for Open-Space Agricultural Use) or Form 50-165 (Application for 1-d Agricultural Appraisal).
- Submit your application to your county’s appraisal district by May 1.
- Be prepared to provide supplemental documents that demonstrate usage, like lease agreements or receipts.
Important: Failure to apply by the deadline may result in a rollback tax, requiring you to pay the difference in taxes from the past three years based on market value.
Wildlife Management Exemption in Texas
The Wildlife Management Exemption is an extension of the Agriculture Exemption. It offers relief for land that is actively managed to support indigenous wildlife populations.
Who Qualifies?
To qualify:
- The land must already qualify as open-space agricultural or timberland.
- The property owner must perform at least 3 of 7 approved wildlife management practices, including predator control, habitat management, and supplemental feeding.
Examples of Wildlife Activities:
- Providing shelters or supplemental water to animals.
- Conducting a census or survey of species populations.
- Controlling erosion to preserve natural habitats.
The goal is to sustain native species for recreational, scientific, or commercial purposes.
How to Apply
- Fill out Form 50-129 for Open-Space Usage and submit a Wildlife Management Plan to your county appraiser.
- Obtain the necessary guidelines and forms from the Texas Parks and Wildlife Department.
- Ensure that your activities align with legally mandated wildlife practices. Appraisers may require yearly reports to confirm compliance.
This exemption is an excellent option for property owners wanting to conserve Texas’ natural ecosystems and also reduce their financial obligation to the tax assessor.
Timber Management Exemption in Texas
Timberland Exemptions cater to properties primarily used for producing commercial wood products like sawtimber, poles, and pulpwood.
Who Qualifies?
To qualify for a Timber Management Exemption:
- Primary Use: The land must be primarily and actively used for timber production.
- Historical Use: The land must have been used for timber production or agriculture for at least five of the past seven years.
- Intent: Landowners must show a clear intent to generate income through timber production.
Important notes:
- Land with standing timber intended for recreational or aesthetic purposes does not qualify.
- Portions of timberland that support related operations (like access roads) count toward eligibility.
How to Apply
- File Form 50-167 for 1-d-1 Timberland Appraisal (or Form 50-281 for Restricted Timber Use).
- Submit your application to the appropriate appraisal district by May 1.
- Provide evidence showing timberland activity, such as forestry plans or sales documentation.
Timber production offers multiple benefits aside from tax relief. From environmental contributions like carbon sequestration to economic outputs, proper timber management sustains Texas agriculture.
How to Choose the Right Exemption for Your Land
Determining which exemption best suits your land will depend on how the property is currently used and your long-term plans. Some landowners may start with an Agriculture Exemption and later transition to Wildlife or Timberland Management as priorities shift.
Here are key considerations:
- Agriculture Exemption is ideal for active farming or raising livestock.
- Wildlife Management Exemption is perfect if your focus is fostering wildlife or eco-tourism.
- Timber Management Exemption makes sense for landowners involved in growing and harvesting commercial wood products.
If you’re unsure, consult local appraisers or land management experts in your area.
Benefits of These Exemptions
- Significant Tax Savings: These exemptions allow property taxes to be based on land productivity rather than market value.
- Encourages Land Conservation: Wildlife and agricultural exemptions incentivize preserving native species and habitats.
- Flexible Uses: Transitioning from one exemption type to another is possible, provided requirements are met and documented.
Take advantage of these incentives to better manage land use and align with your financial and environmental goals.
Next Steps for Landowners in Texas
Understanding Texas’ Agriculture, Wildlife, and Timber Management Exemptions is the first step toward optimizing your land management strategy. Applying for the appropriate exemption can equate to significant tax savings and give you the tools to manage your property effectively.
If you’re ready to apply:
- Gather proof of your land’s current and historical use.
- Complete the necessary application forms based on your desired exemption.
- Submit everything to your county appraiser before May 1.
For detailed information or personalized advice, visit your county tax office or consult with resource agencies like the Texas Comptroller or Texas Parks and Wildlife Department.
By leveraging these exemptions, you’ll not only save money but also contribute to sustaining Texas’ agricultural heritage and natural ecosystems.
Property Tax Reduction Pro Tip: Protest Your Property Taxes Every Year
Now that we’ve explored what you can’t rely on for property tax estimates, some possible exemptions you can use to reduce your tax burden and given you some guidelines about how you can estimate your property taxes, the next step is keeping your property taxes low for the duration you live there.
The best way to do this is to protest your property taxes every single year. You won’t always win or get a significant reduction, but any reduction can help you not only this year but for years to come. If you have a homestead exemption with a yearly cap on how much they can increase your assessed value, this sets the bar lower for next year’s increase. If you continue to protest the assessed value and continue to get even small reductions, that can translate into a savings of thousands over the course of the years you own the property.
Protests can be done by the homeowner directly or there are a few companies that offer this service and will protest on your behalf. I choose to hire a company to protest my property taxes, even though I have all of the data at my fingertips. They know what to say (and more importantly what NOT to say) to the assessor’s office to get the highest reduction. Typically you pay a nominal fee plus a portion of the savings they acquire on your behalf so it’s really a low risk proposition.
Austin Luxury Home Property Taxes are Impossible to Predict to the Dollar – But You Can Get an Estimate
Remember, the best estimate for your Austin luxury home property taxes is the tax rate multiplied by the purchase price. This will likely be a high estimate, but it will ensure you have budgeted for any unexpected surprises. Be sure to apply for all of the exemptions you qualify for and consider an Agricultural Exemption if you have the right property for that. It is a lot of work to set up, but can mean thousands of dollars of savings per year. Finally, protest your valuations every single year without fail.
Considering Buying an Austin Luxury Home? Assemble Your Team
Understanding property taxes can be overwhelming, but with the right knowledge and strategies, you can better manage your financial responsibilities. If you’re looking to buy or sell luxury real estate in Austin, our expert team of luxury buyer’s agents is here to guide you every step of the way. We specialize in finding the perfect home for our clients and negotiating the best possible deals. Contact us today at (512) 827-8323 or email us at info@11OaksRealty.com to take the next step toward your ideal Austin luxury home and ensure you’re making informed decisions every step of the way.
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