When Do You Start Paying Property Taxes on a New Home in Texas?
One thing all Texas property owners know is that they have to pay property taxes. What is less certain for some is when exactly they are required to pay them. Specifically, how long after buying a new home will your first tax payment become due?
Does The Seller or Buyer Pay the First Property Tax Bill?
The simple answer is that tax bills are generally mailed out on October 1st every year, and payment is due the following January, regardless of who owns the home and when it changed hands. No matter when the property is sold, or who owns it, the tax cycle continues, and taxes are due on the same date every year. The bill will most likely have to be split between you - the buyer - and the seller. The portion allocated to each of you will generally depend on the length of time that each party held the property during the tax year. The question is, if you buy a home halfway through the year, how much of the annual tax burden are you liable for?
In this case, the seller typically pays a prorated share of property taxes for the time they owned the property in the tax year up to the closing date. In this scenario, you only pay the taxes due after the closing. So, the seller is typically responsible for paying the property taxes equal to the time before the closing date. For example, if the closing date is in August, the seller will be responsible for 8 months’ worth of taxes. However, the buyer would only be responsible for four months’ worth of taxes. If the seller has already paid the full year’s value of property taxes, you may be responsible for reimbursing those four months. The seller’s agreement, however, should disclose which party pays what.
Moreover, there are still other factors to consider. It often depends on the specific deal signed between the seller and buyer. In some cases, the buyer might be required to pay all the taxes for the year or another agreed-upon amount before closing the deal. In others, the seller might offer to pay the taxes to sweeten the deal and expedite the sale.
You May Have to Pre-Pay Your Property Tax
When a sale takes place, it is important to ensure that any taxes due on the property are covered. In many cases, you would be required to pay that sum - or part of it - which would then be credited at closing based on prorated amounts. As mentioned above, the exact division of liability between you and the seller will depend on a variety of factors. Once the final bill is released, you can see how much was owed and how much of that total was your responsibility. In most settings, if you have received an insufficient credit, the remaining balance will be reimbursed to you. If you have underpaid, and the seller has paid more than was due, the seller will be due for a reimbursement or credit.
Any tax liens that may currently apply to the property will need to be settled before the sale is concluded. The title company will need to check to find out if there are any tax liens. On closing the sale, they would then inform you and the seller how much each of you is liable for.
The key to making sense of the amounts owed on the property is to understand the tax cycle and property tax payment dates. Valuations take place effective January 1st, notifications are mailed in April and May, and the bills are sent out on October 1st, with payment falling due on the following January 31st. The division of the tax liability and the amounts that need to be prepaid will depend on the date on which the sale takes place.
You May Receive a Higher Tax Bill in the Following Year
The tax bill you receive in the year following your home purchase may be higher than your initial bill. This increase often occurs because the previous owner may have qualified for tax exemptions, such as those for age, veteran status, or homestead exemptions. Unless you also qualify for these exemptions, you will be responsible for the full tax amount based on the assessed property value. Additionally, Texas property taxes are reassessed annually on January 1st, so your tax amount could increase if the property’s assessed value rises.
This should not come as a surprise, however. Your realtor or lawyer should inform you beforehand of the differences between your rates and those paid by the seller. Always ask if any exemptions are applied to the seller, which will not be applicable once you take ownership of the property.
You May Need to Consider a Property Tax Loan
Once you have taken ownership of your home, staying informed about property taxes, how they are assessed, and the annual tax cycles is very important. Be aware of the assessment dates at the beginning of the year, and use opportunities available to you to appeal your assessment if you disagree with it. That would have to happen before April. Then, look out for your bill in October and make sure you can and do pay it before January 31st.
If you go into the purchase of your new property uncertain of the tax requirements, you may find yourself with an overdue account by the beginning of the next year, accruing penalties and interest. It is then advisable to get in touch with a property tax lender to help you alleviate the burden. You can immediately settle your debt to the tax authorities and pay the lender back on a schedule that suits your budget.
AFIC provides loans to cover both overdue and current property taxes, ensuring that your account with the tax office remains in good standing. We tailor repayment schedules to help you avoid penalties and interest.
American Finance & Investment Co., Inc. (AFIC) is an OCCC-registered property tax lender. We offer our clients an affordable, hassle-free way to manage their Texas property taxes. We can ensure that your account with the local government tax office is paid in full and will work out a manageable repayment plan for you. AFIC can provide you with an instant quote by completing the form on our homepage. For qualifying properties, we can help you pay off your delinquent taxes and offer you the following benefits:
- Quick and completely online process
- No money down
- No credit check
- Free 30-day rate match
- Match competitors and beat their rate by 1%
- Avoid high penalties and foreclosure
We pride ourselves on finding solutions to suit the unique needs of our clients. If you would like to discuss our property tax loans, or if you need any additional advice on the requirements of your local tax authorities and the details of your property taxes, please contact our experienced team at AFIC today.
