Texas property tax accounting operates through a three-tier system: county appraisal districts value property at market value as of January 1, local taxing units (counties, cities, school districts) set their own tax rates, and county tax assessor-collectors collect and distribute funds.
With over 4,796 local taxing entities and no state property tax, Texas property owners pay directly to the local governments providing their services. The average effective tax rate is 1.38% of property value, though rates vary significantly by county, from 0.64% in Sabine County to 2.14% in El Paso County.
You own a commercial property in Harris County valued at $850,000. By October, you receive separate tax bills totaling $15,045, $8,806 from the school district, $3,323 from the county, $1,867 from the city, and $1,049 from various special districts including hospital, fire, and water authorities. Each entity independently set its rate based on its budget needs, all using the same $850,000 appraised value certified by your county appraisal district.
Texas takes a unique approach to property taxation. Unlike states with centralized property tax systems, Texas delegates all property tax authority to local governments. The state constitution prohibits state property taxes, and the Texas Comptroller's office neither collects taxes nor sets rates. This decentralized structure means property tax accounting involves coordinating between appraisal districts, review boards, multiple taxing units, and collection offices, each with distinct roles and deadlines.
Here's what you need to know: how appraisal districts determine property values, which local governments can tax your property, when the property tax calendar matters, how to protest valuations, and what accounting systems track these complex multi-entity tax assessments.
Every Texas county operates an independent appraisal district governed by a board of directors elected by the local taxing units. The chief appraiser, hired by this board, leads the district's annual property valuation process. Texas law requires appraisal districts to value all property at market value as of January 1 each year, using generally accepted appraisal methods while considering each property's individual characteristics.
Appraisal districts employ three standard valuation approaches depending on property type. The sales comparison approach compares your property to similar properties recently sold, adjusting for differences in size, condition, location, and amenities. This method works best for single-family homes and vacant land where sufficient sales data exists. The cost approach estimates what it would cost to replace the building, applies depreciation, and adds land value, ideal for unique properties, new construction, or properties with scarce sales data.
The income approach calculates value based on the property's income-producing capacity, analyzing net operating income and capitalization rates from comparable investment properties. Commercial properties, apartments, and income-producing real estate typically use this method. For residential properties, most appraisal districts use mass appraisal techniques that classify properties by characteristics and apply valuation models across thousands of properties simultaneously, following Uniform Standards of Professional Appraisal Practice (USPAP).
Between January 1 and April 30, appraisal districts process applications for exemptions (homestead, over-65, disability, agricultural), special appraisals (productivity value for agricultural land), and ownership changes. By April 1 for single-family residences and May 1 for other properties, the chief appraiser must deliver notices of appraised value to property owners. This notice shows your property's appraised value, any exemptions applied, and estimated taxes for each taxing unit.
Property owners have until May 15 (or 30 days after receiving the notice, whichever is later) to protest their appraisal with the appraisal review board (ARB). The ARB is an independent panel of local citizens appointed to resolve disputes between property owners and appraisal districts. Professional accounting firms and property tax consultants often handle these protests, particularly for commercial properties where valuations involve complex income and expense analysis. Understanding how to read financial statements becomes critical when protesting commercial property values using the income approach.
Texas law authorizes over 4,796 local taxing units to levy property taxes, including 1,024 school districts, 254 counties, 1,199 cities, and 2,319 special districts. Every property in Texas pays county property taxes and school district taxes. Depending on location, you may also pay city taxes (if inside city limits) and special district taxes for services like hospital districts, junior colleges, municipal utility districts, fire protection districts, emergency services districts, and road districts.
School districts generate the largest portion of most property tax bills, typically 50-60% of the total. Texas school districts rely heavily on local property taxes for funding, unlike states where education receives more state funding. Counties tax property to fund county roads, sheriff departments, courts, and general county operations. Cities levy taxes for city streets, police, fire protection, libraries, and municipal services. Special districts tax for specific purposes like water systems, emergency medical services, or community colleges.
Each taxing unit independently sets its own tax rate based on its annual budget needs. The Texas Constitution caps property tax revenue growth at 3.5% annually for most entities without voter approval. If a taxing unit wants to adopt a rate that generates more than 3.5% additional revenue (adjusted for new property), it must hold a public hearing and may face a rollback election if enough voters petition for one.
Tax rates are expressed in dollars per $100 of taxable value. A school district with a $1.04 tax rate charges $1.04 for every $100 of property value, meaning a $200,000 home (after exemptions) pays $2,080 annually to that district. When you add county taxes ($0.50 per $100), city taxes ($0.60 per $100), and special districts ($0.15 per $100), your combined rate might be $2.29 per $100, resulting in $4,580 in total property taxes.
The effective tax rate (actual taxes paid as a percentage of market value) varies dramatically by location. Harris County averages 1.77%, Travis County 1.61%, Fort Bend County 2.06%, and El Paso County 2.14%, all significantly higher than the national average of 1.07%. Rural counties with fewer services often have lower rates, like Sabine County at 0.64%. These variations reflect different service levels, population densities, and local funding decisions across Texas's diverse communities.
After appraisal districts certify values and taxing units adopt rates (typically by September), county tax assessor-collectors prepare and mail property tax bills starting October 1. The tax assessor-collector is an elected county official responsible for calculating tax bills, collecting payments, and distributing funds to all taxing entities. In larger counties, multiple taxing units often contract with the county tax assessor-collector to handle all collections, creating a unified billing system.
Texas property taxes are due January 31 of the year following the tax year. If you receive your 2024 tax bill in October 2024, payment is due by January 31, 2025. Many mortgage lenders escrow property taxes, paying them on behalf of property owners. For properties without escrow, owners can pay directly to the county tax office via mail, online, or in person. Some counties offer split payments or quarterly payments for taxpayers who qualify.
Penalties and interest begin accruing February 1 for most unpaid taxes. The penalty starts at 6% and increases monthly, reaching 12% by July 1. Interest accrues at 1% per month. On July 1, attorney collection fees of up to 20% may be added to delinquent accounts. County tax collectors can initiate legal proceedings to collect unpaid taxes, including filing liens and eventually foreclosing on property for non-payment.
Once collected, the tax assessor-collector distributes funds to each taxing unit based on the proportion of taxes collected for that entity. A property owner paying $5,000 in total taxes might see $2,800 go to the school district, $1,000 to the county, $900 to the city, and $300 split among special districts. This distribution happens continuously throughout the collection period, with taxing units receiving funds as taxpayers remit payments.
Accounting systems for property tax collection must track payments at the individual property level (account number, owner, property description), allocate payments across multiple taxing entities according to their respective rates, calculate penalties and interest daily, process refunds for overpayments or successful protests, and generate reports for each taxing unit showing collections, delinquencies, and distributions. Professional bookkeeping services specializing in municipal accounting help counties manage these complex multi-entity systems.
Property owners have the right to protest appraisal district actions affecting their property, including appraised value, denial of exemptions, denial of special appraisals, or classification of property. The deadline to file a protest is May 15 or 30 days after receiving your notice of appraised value, whichever is later. Filing a protest is free and can be done online, by mail, or in person with your county appraisal district.
The appraisal review board (ARB) hears protests and makes binding decisions on disputed values. ARB hearings typically occur between May and July. Property owners can represent themselves or hire licensed property tax consultants or attorneys to represent them. In commercial real estate, professional representation is common, property tax consultants typically work on contingency, charging 25-50% of tax savings achieved.
To succeed in a protest, you need evidence supporting your position. For residential properties, this includes recent sales of comparable properties (similar size, condition, location, age), photographs showing defects or needed repairs, repair estimates for significant issues, and evidence of market conditions affecting your neighborhood. For commercial properties, you'll need detailed income and expense statements, rent rolls, vacancy rates, capitalization rate analyses, and comparable sales or income data from similar properties.
If the ARB rules against you, you have two appeal options: file suit in district court within 60 days of receiving the ARB order, or request binding arbitration (for properties valued at $3 million or less). Arbitration requires a $500 deposit and uses a neutral arbitrator appointed by the Texas Comptroller. The arbitrator's decision is final and binding on both parties. Most commercial property owners pursue arbitration for mid-value properties where district court litigation costs would exceed potential tax savings.
Texas property tax consultants must be licensed by the Texas Department of Licensing and Regulation if they represent property owners for a fee. Licensing requires passing an exam demonstrating knowledge of Texas property tax law, appraisal methods, and ARB procedures. When selecting a consultant, verify their license status, understand their fee structure (contingency percentage, minimum fees, costs), ask about their success rate with similar properties, and review their experience with your property type and appraisal district.
Texas businesses face property tax obligations on both real property (land and buildings) and business personal property (equipment, inventory, furniture, fixtures, vehicles). Business personal property taxation creates unique accounting challenges because values change constantly as businesses buy equipment, sell assets, or deplete inventory. The tax applies to tangible personal property used to produce income on January 1 of each tax year.
Businesses must file annual renditions (property reports) with their county appraisal district by April 15, listing all business personal property owned or leased on January 1. The rendition includes detailed schedules showing acquisition cost, date purchased, and depreciation for equipment, furniture, fixtures, and vehicles. Inventory receives special treatment, retailers can use the lower of cost or market value, and certain inventory types qualify for freeport exemptions (goods held temporarily for export).
Appraisal districts use the rendition data to calculate business personal property values, typically applying depreciation schedules based on asset life and condition. Manufacturing equipment might depreciate over 7-10 years, office furniture over 5-7 years, and computers over 3-5 years. The district applies the appropriate tax rates (school, county, city, special districts) to the total business personal property value, generating a separate tax bill from real property taxes.
Accounting systems must track business personal property with enough detail to support rendition filings and protest values. This includes maintaining fixed asset registers showing purchase date, cost, description, and location for each asset, calculating depreciation using both financial accounting methods (for books) and property tax methods (for rendition), reconciling disposals and additions, and identifying exempt property (inventory in transit, qualified freeport goods, pollution control equipment). Proper documentation and audit readiness matters particularly for business personal property, where appraisal districts frequently audit renditions.
Multi-location businesses face additional complexity. A retail chain with 50 Texas locations files renditions in multiple counties, each with different appraisal district procedures, forms, and deadlines. Centralized accounting systems must allocate corporate assets (computers, software, furniture) across locations based on headcount or square footage, track location-specific assets separately, file timely renditions in all jurisdictions, and coordinate protests across multiple appraisal review boards if needed.
Texas offers numerous property tax exemptions and special appraisals that significantly reduce tax bills for qualifying property owners. The residential homestead exemption provides at least $25,000 exemption from school district taxes, with additional optional exemptions from counties (typically $5,000-$20,000), cities (varies), and special districts. To qualify, you must own and occupy the property as your primary residence on January 1. The exemption transfers if you move to a new primary residence in Texas.
Age 65 and older property owners receive an additional $10,000 school district exemption plus whatever additional amount the county, city, or special districts provide. Many Texas counties grant substantial additional over-65 exemptions, some offer $60,000-$100,000+ in combined exemptions. Additionally, property taxes freeze at the amount owed the year you qualify for over-65 exemption, protecting against future increases (you're still responsible for taxes on new improvements).
Disabled homeowners receive the same additional exemptions and tax ceiling as over-65 owners. Disabled veterans receive exemptions based on disability rating: 10-29% rating receives $5,000 exemption, 30-49% receives $7,500, 50-69% receives $10,000, 70-100% receives $12,000, and 100% disabled or unemployable veterans receive full exemption from all property taxes. Surviving spouses of disabled veterans may continue receiving these exemptions.
Agricultural land qualifies for special productivity value appraisal rather than market value. This dramatically reduces property taxes by appraising land based on its capacity to produce agricultural products (crops, livestock, wildlife management) rather than development potential. A 100-acre tract with $20,000-per-acre market value might appraise at $500-$1,000 per acre under agricultural appraisal. Property must have been used primarily for agricultural purposes for at least 5 of the preceding 7 years to qualify.
Timberland receives similar treatment, appraised at productivity value based on its capacity to produce timber. Freeport exemptions apply to inventory imported or exported across Texas borders if held less than 175 days. Pollution control equipment and solar/wind energy devices receive 100% exemption. Religious, charitable, and certain nonprofit organizations receive exemptions for property used in their exempt purposes.
Texas's truth-in-taxation laws require transparency when taxing units adopt rates and provide taxpayers opportunities to participate in rate-setting decisions. After appraisal districts certify property values (typically by July 25), each taxing unit calculates two key rates: the no-new-revenue rate (formerly called effective rate) and the voter-approval rate (formerly rollback rate).
The no-new-revenue rate is the rate that would generate the same total revenue from existing properties as the prior year. It accounts for value changes on existing property but excludes new construction. If property values increase 5% countywide, the no-new-revenue rate would be approximately 5% lower than last year's rate to generate the same revenue. This rate represents maintaining the status quo.
The voter-approval rate is the maximum rate a taxing unit can adopt without automatically triggering an election. For most entities, this is 3.5% higher than the no-new-revenue rate. School districts have a different formula involving maintenance and operations (M&O) rates capped by state law. If a taxing unit adopts a rate exceeding the voter-approval rate, voters can petition for an election to approve or reject the rate.
Taxing units must hold public hearings before adopting rates that exceed the no-new-revenue rate. The hearing notices must be published in newspapers, posted online, and include specific language about proposed rates and tax impacts. Property owners and businesses should engage in tax planning by attending these hearings, monitoring proposed rates, and calculating impacts on their properties before final adoption.
Counties must post detailed tax rate information online at a specific state-designated website (Texas.gov/PropertyTaxes) showing proposed rates, prior year comparisons, budget information, and hearing schedules. This centralized database allows taxpayers to compare rates across jurisdictions and track changes over time. Each taxing unit must maintain its own property tax database showing how much tax revenue comes from different properties and how adopted rates affect individual tax bills.
Yes, you're still responsible for property taxes, your mortgage company simply pays them on your behalf using funds you've deposited into escrow. Your lender estimates annual taxes, divides by 12, and adds that amount to your monthly mortgage payment. The lender pays the county tax assessor-collector when bills are due. You should review your escrow analysis annually to ensure sufficient funds are collected, especially after successful protests that reduce your appraised value or when taxing units increase rates.
The person who owns property on January 1 is responsible for that year's property taxes. Real estate purchase contracts typically include tax proration clauses where the seller credits the buyer for the portion of taxes covering the period after closing. For example, if you close on July 1, the seller typically credits you for 50% of the annual taxes. However, the county tax office sends the bill to whoever owned the property on January 1, so coordinate payment responsibilities clearly in your purchase agreement.
Yes, but with limitations. For your primary residence, property taxes are deductible as an itemized deduction subject to the $10,000 combined cap on state and local taxes (SALT). For rental or business properties, property taxes are fully deductible as business expenses on Schedule E or Schedule C with no SALT cap limitations. The deduction applies to taxes actually paid during the tax year, not taxes accrued or escrowed. Keep your tax receipts as documentation for IRS purposes.
File a protest with your county appraisal district by May 15 or within 30 days of receiving your notice of appraised value. You can file online through the district's website, by mail, or in person, there's no fee to protest. Gather evidence supporting your position: comparable sales data, photographs of defects, repair estimates, or income/expense statements for commercial properties. The appraisal review board will schedule a hearing where you present your evidence. Consider hiring a licensed property tax consultant for commercial properties or complex residential protests.
Your taxes increase when your property's appraised value increases, even if rates remain constant. Texas appraises property at market value each January 1, so rising home prices cause corresponding tax increases. A property appraised at $200,000 with a 2.5% total tax rate pays $5,000 annually. If appraised value increases to $220,000 with the same 2.5% rate, taxes jump to $5,500. This is why homestead owners over 65 benefit significantly from the tax ceiling that freezes their taxes regardless of future value increases.
Business personal property tax applies to tangible personal property used to produce income, equipment, furniture, fixtures, inventory, and vehicles owned or leased by businesses. If you operate a business, restaurant, retail store, medical practice, or any income-producing activity, you must file an annual rendition by April 15 listing all business personal property owned on January 1. The appraisal district values this property (typically using depreciation schedules) and taxes it at the same rates as real property. Home-based businesses with minimal equipment may have de minimis exemptions.
No, property taxes are secured debts with liens attached to the property and cannot be discharged in bankruptcy. The tax lien remains attached to the property regardless of bankruptcy status. However, bankruptcy can provide temporary relief from collection actions and allow you time to catch up on delinquent taxes through a payment plan. If you cannot pay property taxes, contact your county tax office about payment plans or investigate whether you qualify for over-65 or disability deferrals that allow postponing payment until the property sells or ownership changes.
Madras Accountancy provides comprehensive accounting support for businesses managing Texas property tax obligations. We handle business personal property rendition preparation with detailed asset tracking and depreciation calculations, maintain fixed asset registers compliant with Texas appraisal district requirements, coordinate multi-location rendition filings across counties, support property tax protests with financial analysis and documentation, and integrate property tax accounting into your overall financial reporting. Our team has experience with Texas property tax systems since 2015, helping businesses navigate the complexity of multi-county operations and minimize property tax costs through proper accounting and strategic planning.
Texas property tax accounting requires understanding how independent appraisal districts, multiple taxing units, and county collection offices interact to generate and collect your annual tax bill. The system's decentralization creates complexity, particularly for businesses operating in multiple counties or managing both real and personal property across different jurisdictions.
The key action items: mark your calendar for May 15 protest deadlines, review your notice of appraised value carefully each April/May, maintain detailed records for business personal property renditions due April 15, monitor truth-in-taxation hearings when taxing units propose rate increases, and ensure your accounting systems properly track and allocate property taxes across properties and entities.
For businesses with significant property holdings or complex multi-location operations, professional accounting support ensures compliance with rendition requirements, proper financial reporting of property tax expenses, and documentation supporting successful protests. Madras Accountancy has provided property tax accounting services since 2015, helping businesses maintain accurate records, meet filing deadlines, and integrate property tax planning into overall financial management strategies.
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January 13, 2026
The IRS treats repairs as immediately deductible expenses that restore property to its original condition, while capital improvements must be capitalized and depreciated over 27.5-39 years.
January 13, 2026
An IRS 1031 exchange (named for Internal Revenue Code Section 1031) allows real estate investors to defer capital gains taxes when selling investment property by reinvesting proceeds into like-kind replacement property.
