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Protesting Texas Property Taxes

A do-it-yourself guide by Bart McLeroy
Originally published April 5, 2020


With the right data and a little preparation, anyone can protest their own property taxes in the great State of Texas.

Disclaimer: this article provides general information about the property tax protest process in Texas. I am not acting as your agent or recommending any products or services. If you want to discuss a particular property, please contact me using the form at the bottom of this page.

Why should I protest my Texas property taxes?
Property taxes pay for vital local services. We want well-funded police and fire departments, and well-staffed schools.
However, I don't know anyone that enjoys over-paying for things. If my real estate is worth $300,000, I don't want to pay taxes on it based on a valuation of $500,000.

When do I protest my Texas property taxes?
Every year, your county's Central Appraisal District will send out a notice of valuation. This typically happens in April. In Dallas County, that notice comes on a post card. (Although be prepared for things to change thanks to COVID-19 lockdowns!)
Once the Appraisal District sends its notices, property owners have 30 days to file a formal protest. 

How do I protest my Texas property taxes?
Depending on your Appraisal District, you can file your formal protest online or you may have to send in a physical form. Check your county's Appraisal District web site for further information.

Filing the protest is only the first step in the protest process. See below for more information.

What are you protesting? It's important to remember in this process that you are not protesting the tax rate. Those rates are set by the individual taxing entities like cities, school districts, etc. You are protesting your property's assessed value, that is the value assigned to it by the Appraisal District for taxation purposes.

When are you protesting? The goal of this process is to establish the value of a particular property as of January 1 of that year. So the valuations that go out in April 2020, and that will be protested in the summer of 2020, are seeking to determine the value of a property as of January 1, 2020. That is important to note when making arguments about valuations - you wouldn't use property damage that occurred on March 1 to change the value on January 1.

Who can protest? A property owner can always represent themselves through this process. Additionally, they can hire an agent to represent their interests. For commercial properties, they can be represented by a property tax consultant, a Texas attorney, or a CPA. For single-family residences or farm / ranch properties, a property owner could also hire a real estate broker, real estate sales agent, or a real estate appraiser to represent their interests. Agents may charge a flat fee, an hourly fee, or a percentage of your tax savings.

Protests at the Appraisal District level can be either formal or informal.

At an informal protest, the property owner (or their agent) speaks with a staff appraiser at the Appraisal District.

At a formal protest, the property owner (or their agent) presents their case to the Appraisal Review Board (ARB).

The informal protest step is appropriate if there is a factual error in your property's entry in the appraisal district's system. (You can see more information about your property by searching for it on your appraisal district's web site.) For example: if the appraisal district thinks your house is 3,000 square feet but it is actually 2,200 square feet, or if they think you have a pool but you don't. Or maybe there is interior damage to the property that would decrease its market value if you put it up for sale. You will want to bring in data to support your claims such as recent photographs, floor plans, signed & dated bids from contractors, or an appraisal (as appropriate).

At the formal protest, your goal is to persuade the Appraisal Review Board (a panel made up of fellow residents of your county) that your property is valued incorrectly. You will make a case that your property should be valued at a certain dollar amount. There are two established ways to make a property valuation argument: based on its market value, or based on equity

Equity Valuation
Let's say there was a neighborhood in which all houses were exactly the same: same floor plan, same level of finish-out, same kind of roof, etc. All of the houses in that neighborhood are valued by the Appraisal District at $200,000, but for some reason your house is valued at $300,000. Based on this information you could make the argument that your house was not being equitably valued compared to your neighbors, and given this rather extreme example, you could probably get your house's valuation lowered by the Appraisal District.

The problem with the equity approach is that it is a relatively recent creation, and therefore doesn't have a lot of precedent or history built up as to how it is to be applied. The general guidelines are that the subject property should be compared to a reasonable number of similar properties that are appropriately adjusted. What is a reasonable number of similar properties? The number "7" is frequently used, but surely there are cases where fewer (or more) would be reasonable. And what constitutes an appropriate adjustment?

I have seen a few cases where an equity analysis proved that a property was over-valued in a very decisive fashion. I have seen many more cases where a lot of time and effort were spent on an equity analysis and it proved absolutely nothing. For the DIY tax protestor, unless you really have a slam-dunk case, I wouldn't spend much time on this approach to value.

Market Valuation
The 3 fundamental approaches to market value have a long history and a great deal of precedent. For that reason they are readily understood by a variety of real estate professionals. If you are going to make a valuation argument for your property, typically you are going to be well-served by focusing on one of these approaches to value:

  1. Sales Comparison Approach
    If you are determining the value of a property that has many comparable property sales, such as a single-family residence, the sales comparison approach will usually provide the most accurate information. The basis of this approach is finding recently-sold properties that are similar to yours, and making appropriate adjustments to help determine what your property should be valued at. For the DIY tax protestor this can be challenging because you probably don't have access to MLS data. Fortunately for those in the greater DFW area as well as in Harris county, there is a very cool service called PropertyTax.io that can put together this kind of report for you at a very reasonable price. (They have graciously provided me with a promo code that will save you $10 off the purchase of any product or report: P41222.)
    If you prefer a more human touch, you can hire an appraiser to prepare an appraisal for your property. For a more cost-efficient alternative you could hire a real estate broker or sales agent to prepare what is called a "Broker's Price Opinion". Not all agents are trained to perform these, and they are different from the typical Competitive Market Analysis that many agents are familiar with. So you may need to ask around to find an agent that is comfortable and competent to prepare a BPO. (I do BPOs all the time, for what it's worth, so feel free to call me if you have questions or need a referral.)
  2. Income Approach 
    If you are determining the value of an income-producing property, the income approach is likely going to be the most accurate. This involves computing the net operating income of the property and dividing it by a capitalization rate (based on the rate of return that an investor would require for this kind of property). As a practical matter, if you want to make an argument based on the income approach, you will need to be prepared to show the Appraisal District your property's income and expenses.
  3. Cost Approach
    If you have a property that cannot be accurately valued using either the sales comparison approach (because it is a kind of property that is rarely sold) or the income approach (because it is not a rental property) then you may want to use the cost approach. This involves estimating the current construction cost of the property and then depreciating it to account for wear and tear. This would be extremely difficult for a DIY tax protestor to calculate accurately - your best bet would be to hire an appraiser to do this for you. You could then submit the appraisal as evidence at your ARB hearing.

What happens at the ARB hearing?
You present your evidence to the ARB members. The Appraisal District will also present evidence to support their proposed valuation.

What happens after the ARB hearing?
The ARB will either uphold the appraisal district's valuation of your property, or they will change it - it could be all of the price reduction you requested, or it could only be a partial reduction.

Do I have any other protest options after the ARB makes its decision?
Yes! The most typical course of action is to appeal to binding arbitration. This involves additional costs for the property owner, so it should be carefully considered before proceeding. More information about that process can be found here.

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