Did you know property taxes are skyrocketing in Texas? Well, it’s not just Texas. Property values are rising fast throughout America and other countries, and so too the property tax grab. Why? Well, the property tax amount is correlated to the property value.
Some people may say that Texas property taxes have reached unreasonable amounts due to rising property valuations, to the point where the average homeowner or business owner may find it hard to keep up with them.
According to the latest comparisons, Texas already has the highest property tax rates in the country – 1.83% and locals can exact a double-digit increase year after year.
Why Property Tax?
For the economy, this tax does indeed bring benefits. Property taxes are the single largest source of income to fund services, including:
- Fire Departments
- Emergency Services
One recent report shows that Texas has one of the fastest-growing populations in the US, and thousands of businesses move here every year. Many homeowners and business owners struggle to pay these taxes every year, ending in a vicious circle of overdue fees.
High Property Values
High valuations are the primary reason for high property taxes in the state of Texas. Asset price inflation is everywhere in the US, and property is an asset. Governments are keen to stimulate their economy to print money, and its circulation boosts spending and economic recovery.
Texas also has many new homes which value up higher than older stock. The state bases property tax on property value, so when the value goes up so too the increase in property tax payable.
Valuations are not always accurate
Unfortunately, the valuations aren’t always accurate, and the tax doesn’t reflect the actual value of the building.
Things are even more complicated for commercial properties. Texas applies the same tax for identical buildings without considering what business is based there and how much it makes.
For example, if a vastly profitable law firm and a small grassroots startup have offices in the same building, they’ll have to pay the same tax, even if the latter barely makes any profit.
Commercial Real Estate
Additionally, Texas commercial property taxes are different because the state also adds chattels when calculating the tax, such as furniture, computers, office equipment, and inventory. Needless to say, all of this adds up, and if your business happens to go through a slower period, the tax can become unreasonably high.
During the worst of Covid-19, Texas Governor implemented a disaster declaration and extended it, which allowed property taxes to be deferred without an interest penalty. The disaster declaration has been lifted, their due dates require property tax payments, or interest penalties will apply.
Property Tax Loans
Although it might sound like a good idea, delaying paying your taxes will only complicate things. If you do not pay the taxes by January 31, the base fee will increase by 6%. By July, the base fee reaches 12%, plus attorney charges, if applicable.
Clearly, paying the initial amount is best, but Texas property tax loans can give you a helping hand if you don’t have the funds. Because you can pay them off in small increments, these specialized loans let you stay in control of your monthly budget and prevent complications such as the seizure of property, sanctions, and penalties.
Everyone’s tax situation is different, depending on whether they own residential or commercial properties. Still, one of the rules of thumb of good money management is to comply with your tax obligations on time. Whether you have perfect credit or a low credit score, property tax loans can help you do that.
Texas is not unique with its rising property taxes. Asset price inflation has seen real estate values jump up much higher than expected, and it is catching homeowners and commercial property owners by surprise.
If you’re renting or leasing, expect the rise in taxes to be passed on with rent increases.
For owner-occupiers, careful management of your cash flow can help spread the payments and keep your tax liability under control.