What to Know About Commercial Property Taxes in Texas
The good news is that the economy of the Lone Star State is booming! The bad news relates to how that affects commercial property taxes in Texas.
What Are Commercial Property Taxes?
What do Nevada, Ohio, South Dakota, Washington, Wyoming, and Texas have in common? They are the only states in the U.S. that don’t have corporate income tax.
Texas also does not levy a state income tax on its citizens. However, the state needs to raise funds somehow, and it does so through personal and commercial property tax. Owners of commercial property in Texas will, no doubt, be aware of the taxes levied against their properties every year. So, how do taxes work on commercial property in Texas? Here are some of the key points you need to know about our state’s commercial property tax.
What Are the Five Rules of Commercial Property Taxes in Texas?
Texas has five basic rules applied to all property taxes in the state, both commercial and residential:
- Taxation must be equal and uniform: No single property should pay more than what can reasonably be expected from it. Your commercial property taxes are thus based on a standard assessment of the property’s value.
- Property must be taxed on its current market value: The market value is the price the property would likely sell for if you sold it today, under fair market conditions, where both the buyer and seller are somewhat seeking the best price, and there is no pressure to buy or sell.
- Each property must have a single appraised value: Various local governments that may have the right to tax you on your property cannot assign different values to your property. They must all use the same value.
- All properties in Texas are subject to tax unless they are eligible for exemption under state law.
- Property owners have the right to reasonable notice of increases in their appraised property value.
How Are Commercial Properties Assessed in Texas?
Local authorities use Central Appraisal Districts (CADs) to appraise properties and establish their worth based on the current market value, improvements made to them, and their revenue (income approach). The appraised value is then multiplied by the applicable tax rate to determine the tax owed on the property in a given tax year.
Another question commercial property owners typically ask is how the market value is determined. The value of a property is tracked year on year and location by location. Determining the value involves an analysis that considers several factors, such as income, cost, market conditions, and comparisons to similar properties, as well as the general values of properties in the area.
“More than 4,796 local governments in Texas — school districts, cities, counties, and various special districts — assess property tax to fund local public services.” - Texas Comptroller
Can Valuations Differ by Property Type in Texas?
The short answer is, “Yes!” Let’s examine the three types of property vis-à-vis tax assessments:
1. Business Real Estate
This refers to the physical land and buildings that are used for commercial purposes, such as retail stores, offices, warehouses, and industrial sites. Value is determined by factors such as the size and condition of the property, its location, and the local real estate market.
2. Business Personal Property (BPP)
BPP is the tangible personal property used in a business’s operation, such as machinery, equipment, furniture, and inventory. Its value is affected by details like the age and condition of the property, its usefulness and function, and its replacement cost.
3. Mineral Property
Mineral property describes any land, mines, wells, or other natural resources that are capable of being extracted and sold, such as oil, gas, and minerals. Their value is assessed according to the quantity and quality of the resources, the current market price for the resources, the cost of extraction, etc.
What is the Commercial Property Tax Rate in Texas?
Texas has the reputation of collecting some of the business’s highest property taxes in the country. However, the property tax rate varies according to the CAD that applies to you.
Find your rate here, or chat with a representative from American Finance & Investment Co., Inc.
How Are Commercial Property Tax Rates Calculated?
Commercial property tax rates are used to fund various branches of government. Depending on their budget requirements, the tax rates are set annually by local entities such as school districts, counties, cities, emergency districts, and special districts.
Commercial Property Tax Bills in Texas
The taxable value of property x tax rate / 100 = your commercial property tax
When Are Appraisal Rolls Certified in Texas
The official date for appraisal rolls to be certified is July 20.
However, if more than 5% of the total appraised value is under protest, the date is pushed out until this figure drops below 5%.
When Are Commercial Property Tax Bills Mailed in Texas?
It may not be marked on your calendar, but knowing when tax bills are mailed saves you from severe penalties and interest on unpaid commercial property tax bills. While the rule of thumb is October or November, with payment due by January 31, the system varies from place to place.
Are There Exemptions for Business Property Taxes?
“Texas provides for a variety of exemptions from property tax for property and property owners that qualify for the exemption.” Texas Comptroller
Examples include property physically damaged by disaster, farm products, and agriculture as well as economic development abatements, historical preservation exemptions, and more. It is important to know about these exemptions and whether or not they are applicable to your commercial property.
Can I Appeal the Appraised Value of My Commercial Property?
If you disagree with the appraised value of your property, you can file a protest with the Appraisal Review Board (ARB). The ARB is an independent panel that hears disputes between taxpayers and appraisal districts. You may need to get the help of a property tax attorney or protest firm to help you file your appeal successfully. Deadlines for protests are typically around May 15 or within 30 days of receiving the appraisal notice.
What is the Best Way to Stay Compliant with Commercial Property Taxes?
The first step to compliance is to remain alert and cognizsant of your property’s tax status. Stay up to date on the annual valuations, file any applicable protests in a timely manner, and plan your finances carefully to ensure that you have sufficient money set aside for tax payments. If you neglect any of these and find yourself falling behind on your tax obligations, you will face fines, penalties, and even a lien on your property.
Need Help Paying Your Commercial Property Taxes? Get a Commercial Property Tax Loan from AFIC
If you are struggling to keep up with taxes, you are not alone! It is something that nearly all business owners face at some point. That is why our team at American Finance & Investment Co., Inc. partners with commercial property owners across the state who need help paying their taxes.
We offer our clients an affordable, hassle-free way to 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 commercial property tax loans, please contact our experienced team at AFIC today.
