How Are Property Tax Values Determined in Texas?
Generally, the assessment date for all property tax in Texas, regardless of property type, is January 1, each year. Learn how business personal property and real property tax values are determined below.
Business Personal Property
Business assets subject to business personal property assessment in Texas would include fixed assets, including machinery and equipment, office furniture and IT equipment, farm and vineyard supplies, molds, tools, and leased equipment.
Merchandise inventory, finished goods, raw materials, goods in process, supplies, and registered vehicles are also considered business personal property assets and are assessed. Assets generally not subject to business personal property tax in Texas would include leasehold or tenant improvements, computer software, permits or fees, intangible costs, financing fees, and items related to real property.
Texas requires filing an annual business personal property tax return that lists all assessable personal property owned by a business as of January 1. The return is due by April 15 each year to the local appraisal district. Currently, all business personal property, regardless of amount and cost, is required to be filed.
After the business personal property tax return is received by the appraisal district, the appraisal district will issue an assessed value notice, generally sent out to the property owner between May 15 and June 15. Upon receipt of the notice, a review of the proposed assessment is needed to verify accuracy of the assessment based on the business personal property tax return as filed.
The basis for valuation by the appraisal district is to value the assets filed on the annual return based on a county-specific depreciation factor schedule. Percent good factors are multiplied by the original cost amounts reported on the annual return.
As needed, an appeal of the business personal property assessment may be filed to challenge the proposed assessment. The appeal filing due date is 30 days from the issuance of the assessed value notice. If the proposed assessment shown on the assessed value notice is correct, no additional steps happen, and the assessment is considered final.
Real Property
Real property valuation in Texas is accomplished by one of three methods of appraisal valuation: the market or sales comparison approach, the income approach, or the cost approach, as further detailed below.
- Market or sales comparison approach. For single-family homes, and most used as information for typical mortgage appraisals
- Income approach. For properties with income potential, including office buildings with tenants, or apartment buildings
- Cost approach. For commercial properties that don’t produce income, were recently completed, or drastically remodeled
As is done for business personal property tax assessments, the appraisal district will issue an assessed value notice for real property in the same manner, generally sent out to the property owner between April 1 and May 15.
Upon receipt of the notice, a review of the proposed assessment is needed to verify accuracy of the assessment based on the attributes of the property and the appraisal valuation method used. As needed, an appeal of the real property assessment may be filed to challenge the proposed assessment.
The appeal filing due date is 30 days from the issuance of the assessed value notice. If the proposed assessment shown on the assessed value notice is correct, no additional steps happen, and the assessment is considered final.
Tax Bills and Payment Deadline
For both business personal property and real property, tax bills are generally issued around the October to November time frame and such bills must be paid by January 31 to be considered timely.
Are There Tax Exemptions and Abatements in Texas?
There are a variety of partial or total property tax exemptions and abatements in Texas. Many depend on specific criteria of the taxpayer, and many can be flexible to accommodate certain property owners.
In all cases below, exemptions and abatements require the filing of one-time or annual applications. Generally, the due date for all exemption and abatement applications is April 30. Local appraisal district chief appraisers are solely responsible for determining whether property qualifies for an exemption or abatement
Residential
When considering residential homes, there are exemptions for primary homesteads, people over age 65, disabled veterans and surviving spouses of disabled veterans, and surviving spouses of first responders killed in the line of duty, among others.
Business
Texas property tax exemptions applicable to businesses include:
- Freeport and goods-in-transit. Applicable to inventory that’s temporarily within the state
- Pollution control. Applicable to both real and personal property that’s intended to reduce air, water, or land pollution
- Mobile marine drilling equipment. Applicable to certain stored offshore drilling equipment
- Wind and solar energy. Applicable to installations where the energy generated is used on-site
- Medical or biomedical property. New for 2024, an exemption may apply to medical or biomedical property located in a medical or biomedical manufacturing facility
Additionally, there are special-use exemptions that will limit or reduce the valuation of property, such as agricultural exemptions for farmland, cattle grazing land, and temporary exemptions like property damaged during natural disasters.
Exemptions in Texas generally need to be applied for by April 30 of each year. Pollution Control exemptions require a certification by the Texas Commission on Environmental Quality prior to making the application for exemption.
Property Tax Abatements and Incentives
Regarding property tax abatements or incentives, Texas taxpayers may enter into economic development agreements that can fully or partially exclude property from being assessed. If you’re in the site-selection process, or are planning on significant capital expenditures in Texas, get in touch with an advisor who specializes in abatements and incentives as early as possible in the planning phase to increase chances of obtaining such an agreement.
Property Tax Compliance Practices
The strongest practices for Texas business personal property tax compliance, like all tax compliance, is to be accurate, timely, and to pay very close attention to the varying appeal deadlines to increase all tax savings opportunities. The life cycle of business personal property tax compliance in Texas can be summarized as follows:
- Obtain the fixed asset listings, trial balances, and related financial information as of January 1 for the situs location to be filed.
- Review and analyze the fixed asset classifications based on the appropriate taxing jurisdictions classifications and the calculation of reportable supplies and inventory.
- Monitor the preparation and delivery of the actual business personal property tax returns via the appropriate method, either electronic or paper filing. While the preparation of returns can be done manually, a property tax software that produces returns acceptable by all appraisal districts can save time and improve accuracy.
- File timely. File the annual business personal property tax returns by April 15 or apply for a 30-day extension through written request to the local appraisal district. If a return is filed late or goes unfiled completely, a 10% penalty is automatically added to the assessment.
- Be mindful that while renditions can be extended, applications for exemptions cannot.
We’re Here to Help
For guidance on property tax in Texas, contact your Moss Adams professional.
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