As a business owner, it’s important to know what property taxes you’ll have to pay if you conduct business in Texas. The lack of a state income tax means that local governments set their budgets for schools and other public necessities, along with the rates that property owners have to pay to maintain these services.

With that said, the property tax system is complex so having the right strategy can help you save a significant amount of money come January. 

In this article, we’ll discuss the purpose of Texas’ property tax and go over the pillars that make up this essential system.

The Purpose of Texas Property Taxes

Before going any further, it’s important to highlight that the laws governing tax rates and deadlines are detailed in the Texas Property Tax Code. This set of regulations dictate the valuation process, collection, and distribution of the collected funds to the necessary entities. 

One of the main roles of the Tax Code is to ensure uniform valuation and taxation. In other words, it dictates the steps and guidelines that help ensure fairness and accuracy, which translates to consistent taxes regardless of location. 

While it’s true that the collected taxes are used for public services, the Texas Property Tax Code  2024 also sets guidelines for property owners to protest unfair taxation. Not only this, it also lays out a set of property owner rights that protect them against insurmountable spikes in bills. 

The Pillars of the Texas Property Tax Code 

Texas is home to more than 50 Fortune 500 companies and 3.2 small businesses, all of which have to abide by the Texas Property Tax Code.

The tax payments collected from this regulation is used to provide local services, like schools, streets, roads, police, and the fire department. 

The Texas Property Tax Code sets the codes that must be followed, while local officials and property tax agencies are responsible for determining property values, deciding on a tax rate, and collecting these funds from the millions of companies in the state. 

Let’s break down the pillars that keep the system in place. 

1. Property Valuation and Assessment

Property in Texas is taxed based on its value, and the valuation process for each commercial estate is overseen by the local government officials in charge of administering the entire system. 

The tax system ensures that all property is taxed equally and uniformly, with appraisal districts taking care of the valuation process. The chief appraiser administers the appraisal districts that determine the taxable value of each property, as well as any relevant exceptions. 

Appraisals

Every county in Texas has an appraisal district that evaluates the value of property, and this process takes place on January 1st each year. 

Market conditions on this day establish the taxable value of each property, plus it’s important to know that whoever owns the property on January 1st is required to pay the tax. 

Each county handles the appraisal process independently, so it’s important to have an accounting firm that understands your local regulations.

Taxable Value

As mentioned above, the taxable value of each property is determined during the appraisal process. All property in Texas is taxable, unless it falls under a state or federal exemption that covers a portion or all of the estate’s value.

As a taxpayer, you have the right to reasonable notice in case your property’s appraised value skyrockets suddenly. Plus, reaching out to your local appraisal district if you have more specific questions about your property’s taxable value is always an option. 

Exemptions

There are many exemptions you may qualify for depending on your type of business. Some common ones include:

• Agricultural Properties: If your business is agricultural, you may qualify for exemptions, you just have to meet the conditions laid out in the comptroller’s Texas Property Tax Exemptions publication. 
• Primarily Charitable Organizations: Organizations that focus on charitable purposes are also exempt from paying taxes, though it’s necessary to get a few documents from the comptroller’s office. 
• Disaster Affected Properties: It’s important to note that exemptions exist if your property is damaged by storms and other natural disasters. Your property must have extensive damage, plus remember that you have to file your request less than 105 days after the governor declares an emergency.

2. Tax Rates

Since there is no state tax in Texas, the property tax rates are set by the budget needs of local entities including schools and local governments. 

The Texas Property Tax Code outlines the annual increase cap and gives steps on how to set rates in order to ensure a fair process for taxpayers.

3. Property Tax Mechanics

Property value is appraised as of January 1st, but that’s just the beginning of the tax process. Here’s a breakdown of the tax mechanics and important dates to keep in mind:

• January 1st – Property value is assessed as of this date
• January 31st – Deadline to pay property taxes for the prior year
• April 15th – Deadlines for businesses 
• May 1st – Appraisal notices are sent, which contain the assessed value of your property
• May 31st – Deadline to file appraised value protests
• August – September – appraisal districts set their tax rates
• October – Tax bills are sent out

You can protest the appraised value of your property and potentially hold a formal hearing to have it reviewed. Moreover, unpaid tax bills are subject to interest, so your accounting team should ensure timely payment to avoid delinquent status.  

Get Help Elevating Your Property Tax Strategy

Texas doesn’t collect state property tax, so local governments are in charge of setting tax rates to pay for necessary public services. It’s built on the value of your existing property and a percentage of this amount which is due to be paid to the state, plus it also consists of moving parts like property valuation, changing tax rates, and other pillars listed above. 

Understanding the Texas Property Tax Code is a great starting point, but it’s also necessary to create a solid business strategy to maximize your assets. At Industrial Tax Consulting (ITC), we’ve guided enterprises and conglomerates through their own growth journey, including a jump from national to global markets. 
Request a complimentary consultation to discuss your business needs and start building a path to effective tax management.