Discussion: Texas voters approve two modest property tax relief measures
WILLIAMSON COUNTY, Texas - As the state’s housing market rages, Texas homeowners will get a slight break on their property tax bills after voters overwhelmingly passed a pair of statewide ballot measures Saturday.
Voters approved two propositions intended to lower property taxes for homeowners by decisive margins — one aimed at older and disabled Texans and another that would provide modest relief for homeowners across the board.
Williamson County tax assessor collector Larry Gaddes joins Rudy Koski to talk more about the new propositions that were passed during the May 7 election. What should people know about them?
RUDY KOSKI: And here we are. We're back talking taxes and we're talking with Williamson County, Tax Assessor/Collector Larry Gaddes. Larry, thanks a lot for taking time. And we're covering the big election, relatively big. But I had two big propositions, one and two, dealing with property taxes for the average person. What does that mean?
LARRY GADDES: So they both passed, by the way, so Texans will get some property tax relief. Prop one specifically is going to allow us to recalculate the tax ceiling or the freeze for anybody that has an over 65 or disabled persons exemption. They will see. We take into account how much the tax rates have been reduced for school districts by the state legislature and increased state funding for schools. And they force the school districts to lower their tax rates. But nothing was ever done to reset the ceiling for folks that have frozen taxes on their school district, which is the over 65 and disabled persons exemptions on a homesteaded property. So that allows us to go back and recalculate a freeze amount that would lower the taxes for the folks with those two exemptions and then probably.
RUDY KOSKI: 65 and those with disabilities?
LARRY GADDES: Yes, disabilities. And over 65.
RUDY KOSKI: And Prop 2 deals with everybody and that's increasing the homestead exemption from 25 K to 40 K in regards to just school districts, right?
LARRY GADDES: That is correct. So that did get approved. And you will see an exemption amount, just as you stated, Rudy, a $40,000 exemption for anybody that has a homestead on your property. It'll reduce your taxable value for the school district specifically by $40,000 if you have a homestead on your property. What that means in dollars on your tax bill is anywhere between a savings of $150 to $200, depending on where you live and what the tax rate is for your school district. So your tax bill will be about $150 to $200 lower than it would have been had this proposition not passed.
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RUDY KOSKI: How do I know that I'm getting that? Is there something that I have to do there? I need to go down to the tax office to say, hey, I need to recalculate or is that going to be automatic?
LARRY GADDES: That will be automatic. The only thing that a property owner needs to do is to either go to the appraisal district website. Typically, the appraisal district website will have the information first because you apply for your homestead at the appraisal district, no matter which county you live in, you go to the appraisal district to apply for your homestead, go find your property on their website and it'll show on on the detail for your property. It will show exemptions in which exemptions they have applied to your property. Go to the appraisal district website, look for your property, and look for that homestead exemption to make sure that you're getting that that discount in that reduction in your value. And then everything happens automatically from then it'll take some time for the appraisal districts to actually key in this number. They have to wait for the vote to be certified and everything to be approved by the Secretary of State. And it'll take a little bit of time for the appraisal district to put that into their system to reflect a $40,000 reduction. But it will happen. The Tax Office will get that information later on this year and that will be applied to your office. The key to your tax bill. The key thing is making sure your property reflects the homestead exemption.
RUDY KOSKI: What about with Prop 1, I'm 65 or I'm about to turn 65. Do I have to go down there and do something or I'm just disabled? Do I have to show proof that I'm disabled and I get to this benefit that Prop 1 gives me?
LARRY GADDES: Yeah. So in that instance, my office or the tax office, any whoever is collecting your taxes in your county is going to be doing those calculations. It will not be reflected. You won't see a change until the 2023 tax bills come out. So there's still a lot of calculations that need to be done and that that particular proposition entails a lot more complexity that the appraisal district and the tax offices are going to have to work together on that. But everything happens automatically. As long as you have that exemption on your property, the tax offices, whoever is collecting your taxes are going to go through and recalculate those ceilings for you.
RUDY KOSKI: What about if I'm disabled? Do I have to have proof, a doctor's note?
LARRY GADDES: Now, if you're applying for those exemptions, if you don't have those exemptions on your property already and you're applying for those exemptions specifically for the disabled persons exemption, what you're going to need to be doing is getting federal benefits from the Social Security Administration for disability. So that is the proof or the evidence that's required in order to qualify for the disabled persons exemption.
LARRY GADDES: And it can only be applied in conjunction with your homestead. So you apply that that exemption and the over 65 exemption on your homesteaded property.
RUDY KOSKI: And while we're talking about that, what about individuals who are not quite 65 yet, but they're about to turn 65, to be able to grab that exemption that's already there. Plus, go to the website and say, hey, I'm turning 65 or because you have my age on record. Is it automatic?
LARRY GADDES: So if you've lived in the house or you've moved into the house recently, and my reason I say probably in the past 5 to 10 years, I'll tell you the really good appraisal districts, they already have your date of birth or they've you've had to supply your driver's license to show that your mailing address or your residence address on driver's license when you're applying for your over your homestead. So they should already have your date of birth and hopefully have keyed that in anticipation of you turning 65 in a specific year and then the exemption would be applied automatically.
LARRY GADDES: It's always a good idea, though, to go to the appraisal district website, look at your property and see if the exemptions on there, and if not, call the appraisal district and let them know they may need a little bit more information from you primarily or a copy of your driver's license. But that should be pretty painless to be able to get that done. But in some cases, I know our appraisal district is really good about this. If you've applied for a homestead in some previous year and you're close to turning 65, they already have that information and they'll actually apply that exemption to your property automatically. There's nothing for you to do.
RUDY KOSKI: Don't assume that it is right?
LARRY GADDES: Don't assume I would agree with that. Don't assume that it is.
RUDY KOSKI: And in regards to assumptions, the big assumption has started being mailed out, and that is the tax Valuations some folks are looking at. These valuations are property has doubled, maybe even tripled in some cases. And so the big question, is my tax bill going to double? So I'll I'll hit you with that. I think I know what the answer is. But for the people who have seen these huge spikes in valuation on their property, are they're going to see a huge spike in their tax bill.
LARRY GADDES: So the short answer is no, they will not. So the tax bill and I'll tell you to we've gotten a lot of calls to my office saying my taxes have doubled. What's going on? How can you do this to me? I need to express to people, your listeners, Rudy, that what you have received in the mail in the past month or so is simply the value of your property and your right, it does not mean that your tax bill is going to double or triple. I personally saw a 46% increase in the value of my home.
LARRY GADDES: I have heard stories of 60 100% increase in people's value for their property. Your tax bill will not increase at the same amount that your value is increasing. And that is the very simple answer or reason for that is that in 2019, the state legislature passed Senate bill to it, put a cap on the revenue that taxing units can generate off of your work, off of your property from property values. And that is going to those new laws are going to force the taxing units to lower their tax rate because there has been such a huge increase in value. It's going to force the taxing units to adopt lower tax rates. And when I say taxing units, that means anything from the county to school districts. If you may live in a city with the city tax rate and emergency services district. Everybody in your viewing area Rudy in Comal, Hays County, Bastrop County, Williamson, Travis County they all have ACC or Austin Community College taxes most of the properties in the five counties in this area. So all those different tax units are going to be forced to lower their tax rates so that when I calculate the tax bills in October, I'm going to take your value times the tax rates to get the tax amounts that are owed. And we should see significant reductions in the tax rates, meaning that you're not going to pay double on your tax bill, you're going to pay something significantly less.
RUDY KOSKI: And for those entities, it doesn't mean that they're looking at budget cutbacks. They're getting, there is some growth factor into it. It's just they can only grow their budgets can only grow just so much before hitting that cap or going back to the voters and saying, hey, we want more money from you.
LARRY GADDES: That's absolutely correct. So if the voters approved a bond, the tax rate can go up to pay the debt for that bond to make the bond payments. But then the caps come in specifically on maintenance and operations. And I know we're getting into the weeds here, but that three and a half percent cap only allows the taxing unit to increase their M&O revenue. That's your daily operations, your paying your people, their salaries, keeping the lights on in the buildings, paying utility bills and the daily operations of a taxing unit. That revenue can only increase three and a half percent for most taxing units, two and only two and a half percent for school districts. So those are that's the cap that you're talking about is on that that maintenance and operations revenue for a taxing unit.
RUDY KOSKI: I know a lot of people, their eyes are crossing glazing over. You're saying math. How do I calculate that, in this new world of valuations? How do I calculate it?
LARRY GADDES: So I'm going to talk specifically about homesteaded properties, because for the most part, the vast majority of property owners in just about any county are going to be homeowners that live in their homes and have a homestead exemption on their property. So you're going to see a few different numbers.
LARRY GADDES: If you're a homeowner and you're looking at the appraisal district website or you're looking at your notice of appraised value that you have in your hands right now, you're going to see a few values. You're going to see market value, you're going to see assessed value and you're going to see taxable value. So the appraisal districts are required to calculate three different values, specifically on a homesteaded property. Your market value is exactly what that stands for, what your home would sell for on the open market. And they calculate that value based on the sales of similar homes in your neighborhood. Then they have assessed value, and this is where that 10% homestead cap comes into play. Your assessed value can only increase 10% each year. So there's a cap on the value increase for a homesteaded property. So if my property was assessed at $300,000 last year, my assessed value this year can only increase 10%. 10% of 300,000 is $30,000 of my assessed value is going to be $330,000 this year. My market value could be $500,000, but I'm going to be assessed at 330 and then I'm going to reduce that or subtract any exemptions that I'm eligible for from that assessed value.
LARRY GADDES: So let's play this through all the way through from last year. My value this year now $500,000, my assessed value is going to be $330,000 because it only increased 10% from last year. And then let's take, for instance, the school district, the new exemption for the school district. I have a homestead on my property. I'm going to subtract $40,000 now from my assessed value. So $330,000 -40 is $290,000. I'm actually going to be taxed. My office is going to take that $290,000 value, times the school districts tax rate, to get the taxes that are due for that school district. So even though my market value has increased 50% to $500,000, my assessed values only increased 10% because I'm homesteaded and it's 330. Subtract the exemptions from your assessed value and that gives you your taxable value, which is what my office is going to use to calculate your taxes.
LARRY GADDES: So there's a lot of numbers going on there. But please know, this is what your viewers need to know. You're going to see a big, big number up at the top of your notice of appraised value. That's not if that's your homestead. That is not what we're going to use to calculate your taxable value. It's going to be much less than that.
RUDY KOSKI: A Little earlier we talked about strategies, but let's just recap a little bit about some strategies on how to protect yourself, how to keep your bill lower. And let's go over them before we get into some of this other stuff that we want to tale about.
LARRY GADDES: I tell people there's three things you can do to ensure that you're paying the lowest amount of taxes possible. You can you protect your value with the appraisal district. That deadline is coming up for most of the counties in this in central Texas. That's going to be May 16th. Monday, May 16th is going to be the last day that you can protest the value on your property. Some counties may have a later date because of when they mailed their notices out. But the earliest deadline is going to be May 16th next Monday.
LARRY GADDES: So you protest your value with the appraisal district and for votes, provide them some evidence that your value on your property should be lower, whether that be the sales of properties in your neighborhood of homes similar to yours. If you need foundation repair, your roof needs to be replaced. There's major repairs or maintenance that needs to happen on your home. Provide that information. Estimates of the cost to make those repairs to the appraisal district and pictures speak a thousand words.
LARRY GADDES: I know one of the most common things that I hear from taxpayers is my neighbor did a ton of updates in his house and redid the bathrooms and the kitchen in their home and then sold it for a lot more money than what my home is worth. And my home still looks like the seventies. On the inside I've got an avocado green refrigerator and gold, gold fixtures and linoleum countertops and everybody else that's selling their home.
RUDY KOSKI: Hey, what's wrong with that? What's wrong with that? I got I've got a green table countertops?
LARRY GADDES: Everything comes back around in style, right? Just wait for those to come back. So take pictures of your home on the inside and have pictures of the homes that have sold in your neighborhood. Talk to a realtor and ask them to produce the pictures of the homes that have sold that are similar to yours in the neighborhood. So you can show the appraisal review board or the appraiser at the appraisal district. The difference is, look, this home sold for $100,000 more than what mine is worth because of the upgrades are included a picture speak a thousand words but estimates and home sales in your neighborhood so protest your value that's one component.
LARRY GADDES: Number to make sure you have all the exemptions on your property that you're eligible for. That's your homestead. It could be your 65 or over exemption or disabled persons exemption. Or maybe you're a disabled veteran and you received benefits from the government for being a disabled veteran. All of those exemptions apply to your property that you live in. Make sure that those are on your property.
LARRY GADDES: And then the last thing is every taxing unit that taxes your property and there's at least no less than two or three tax units. In many cases, there's as many as six or seven taxing units that tax your property. It's going to be your school district, the county. Those are the two that have to be taxed. I know in in in the central Texas area, ACC is a tax that is on most properties in the five county area here around central Texas. And then you may have a hospital district or our road district, an emergency services district or but each one of those taxing units is going to have an item on the agenda for their meeting in August or September of this year, where they're going to adopt the tax rate. And I encourage everybody to go to those meetings, especially when those tax units are adopting their budgets as well in July and August. Participate in those meetings and let the the the governing bodies, those school board members and city council members and county commissioners and board of directors, let them know how you feel about property taxes. And they need to hear their constituents voices.
RUDY KOSKI: Let's let's go back to real quick in regards to the protest and the evidence that you need. And I really want to hit this hard because sales happened so fast. Sales increases happened so fast and just in everybody's neighborhood. One week, homes were selling for three 1885. And then three weeks later or a month later, they're 450,000, $500,000 so fast. So is it you know, is it worth bringing in documents that said, wait a minute. Wait a minute. This house over here sold for 385, and you got me listed at 600,000 now. Is it even worth doing that kind of challenge?
LARRY GADDES: I will say this. I talked earlier about the homestead cap that your house could have a market value of $500,000 and you could have an assessed value of $330,000. If you protest your value on your homesteaded property, you would have to get the value lowered in this scenario by $170,000 in order to start having an impact on what your tax bill will be in October. I would say in this environment this year, specifically that protesting your homesteaded property. It is going. It's not going to result in anything that could possibly save you any money on your tax bill because there's so much value that's not being taxed because it's protected. Your 46% increase is only going up 10%. And that's what we're using to start that calculation for your tax bill that you would have to have a very significant reduction in your market value for your homesteaded property in order to start having any impact on your tax bill. So it may be very futile this year to protest your value specifically on a homesteaded property that has a big cap on it. That where you're not going to there's probably not going to be much evidence in the way of sales in your neighborhood that's going to show that the appraisal district is has enough evidence to lower your value.
RUDY KOSKI: So why even protest? Why waste my time?
LARRY GADDES: But there are some scenarios.
RUDY KOSKI: And say, I'm done.
LARRY GADDES: There are some scenarios. If you've purchased your home in 2021 or 2022, specifically in 2021, if you've purchased your home recently, you're not going to have that cap protection. There's some there are some specifics going on there that you have to have a base year in the first year that you have your homestead on the property, that's your base year, you lose the cap from the previous owner. So there's a lot of moving parts there. But if you've recently purchased your home in 2021, you don't have the same protections as somebody that's lived in their home for multiple years. So it would be in your best interest to protect your value. In that scenario, I would encourage you go look, go to the appraisal district website for your county and look at your value and find the market value in your assessed value and see what the differences or the gap between that number and see if you'd be able to lower your value below your assessed value. That's going to give you an indication of whether it's worth your time. I would also say in the counties that I looked in, that's Hays Bastrop, Travis and Williamson County, every single one of those appraisal districts, you can protest your value file protest with that appraisal district online. So file the protest. They'll send you information about how they value your property, what property sales they used to determine the value of your property. And then go and talk to a realtor and see if you can have any evidence or if your home has significant maintenance or damage that needs to be repaired. You may be able to have an impact on your assessed value to make a difference on your tax bill.
RUDY KOSKI: And let's recap your breaking news that you teased us with earlier. What do you want people to remember in regards to your new developments?
LARRY GADDES: So I'll let folks know. And this is extremely preliminary because I'm using very, very preliminary numbers. We won't get official numbers from the appraisal district until late July. But looking at some preliminary numbers, I did a calculation for a taxing unit here in Williamson County. And the cap that we talked about earlier, that 3%, three and a half percent increase in the revenue that they can generate is going to cause this taxing unit to have to adopt a much, much lower tax rate, possibly a tax rate that's $0.10 lower than their current tax rate. And I did the math on that, on a homesteaded property and a rent house, a property that does not have the protections of a homestead on it. And what I found was, again, using very, very preliminary numbers that on the homesteaded property, my taxes for 2022 would actually be lower for this one specific taxing unit than what I paid in 2021, even though the value increased by 46%. And even though the the the assessed value increased the 10%, the cap on this homesteaded property, when comparing what I paid last year to what would be paid this year with a reduced tax rate, it looks like the tax bill may actually go down even with these significantly higher values that we're seeing. Doing the same comparison on a very similar property, this rent house value increased about the same amount. It was about 46% increase. The taxes went up about $150 on a 46% increase when you take into account this much, much lower tax rate. So on the rent house, I think that was about a one and a half percent increase in the taxes for this one taxing unit. So the good news here is that it is very, very likely if I applied that that same estimate across the board to the taxing units that would tax the properties on the average home that if they are going to be forced to lower their tax rates, it could actually be a scenario where homeowners are paying a lower tax bill this year than they were last year. As long as that 10% homestead cap is has come into play this year.
RUDY KOSKI: When you're working on the calculator where you just how many times did you have to go back and look at it, say, this can't be true. This can't be right.
LARRY GADDES: You know, it does make sense that that scenario plays out specifically for the homesteaded properties that have the cap in play. Because in Travis in Williamson County specifically, where you have a significant amount of commercial property, that those values have increased just as much as homes have. So commercial values are increasing 50, 60, 70% as well. And there is no cap on those values. So they're they're they're the revenue that's being generated on those other properties is offsetting what homeowners are having to pay. And in theory, it works out. And that's how it should play out. And again, on my very preliminary estimates that it looks like that that may actually come to fruition when we calculate this and it's called the voter approval rate is at three and a half percent cap. That's called the voter approval rate for taxing units. It looks like that that may come to fruition this year where homeowners are paying a lower tax bill than they did last year, even though we're seeing significant increases in values.
RUDY KOSKI: Larry. Thank you very much, Larry Gaddes Williamson County Tax Assessor/Collector. Talking taxes. And boy, we had a lot of numbers right there. Thanks.