Tax Overview

Tax Overview

Understanding The Property Tax Process

A quick overview of Property tax & valuation process

The Property tax is the primary source of local government revenue in Texas and provides funding for the services provided by the County, Cities, School Districts and a variety of special entities such as Hill College, ESD1 & ESD2, and Tehuacana Water District.  While the total combined state and local tax burden in Texas is among the lowest in the nation, the portion of the tax burden borne by the property taxpayers in Texas is relatively high.

Under Texas law, all real property (land, buildings, etc.) and tangible personal property used for the production of income (business inventories, equipment, etc.) is taxable as of January 1 at 100% of its market value unless exempt by law, or unless subject to special appraisal provisions, such as the appraisal of agricultural land at its productivity value.

To save time and money the appraisal district uses mass appraisal to appraise large numbers of properties.  In a mass appraisal, the district first collects detailed descriptions of each taxable property in the district.  It then classifies properties according to a variety of factors, such as size, use and construction type. Using the data from recent property sales, the district appraises the value of typical properties in each class. Taking into account differences such as age or location, the district uses “typical” property values to appraise all the properties in each class.   We may use three common methods to value property: the market, income and cost approaches. The market approach is the most often used and simply asks, “What are the properties similar to this property selling for?” The value of your home is an estimate of the price your home would sell for on Jan. 1. The appraisal district compares your home to similar homes that have sold recently and determines your homes value.  Other methods are used to appraise types of properties that don’t often sell, such as utility companies and gas leases. The income approach asks, “What would an investor pay in anticipation of future income from the property?” The cost approach asks. “How much would it cost to replace the property with one of equal utility?”

Three factors determine the total amount of taxes imposed on a property.  These include the appraised value established by Hill CAD; the exemptions, if any, to which that property may be entitled, such as the homestead exemption for the owner-occupied residential property; and the tax rates set by the governing bodies of the taxing units (jurisdictions) in which the property is located.  The purpose of the appraisal is to allocate the tax burden fairly among all the taxpayers.

For the owner-occupied residential property receiving a homestead exemption, appraised value may be lower than the property’s market value because of what the law refers to as the “homestead cap.”  Under current law, while a homestead property’s Jan. 1 market value isn’t capped, that property’s appraised value is capped at a maximum increase of 10% each year.  For example, January 1 market value of a capped residence might be $200,000.  However, if that home were appraised at $175,000 on January 1 of the prior year, this year’s appraised value would be $192,500 ($175,000 x 1.10).  A residential property qualifies for the cap the year after the owner first received his or her homestead exemption on the property.  In our present economy, there are likely to be situations where the market value of a home may have decreased as of January 1, but the current year’s appraised value may still increase because it was capped the previous year at less than current market value.

Other Exemptions you may qualify for

  • Disability Exemption
  • Disabled Veteran Exemption
  • Over 65 Exemptions

If you have more questions:

Call us (254) 582-2508
Come see us 1407 Abbott Ave. Hillsboro, TX.