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Texas Property Taxes for 2007

Texas Property Tax Information 2007

Local property taxes typically rank second only to the monthly mortgage payment in the total monthly cost of a home. Clearly, local property taxes affect home affordability by increasing the monthly cost of ownership.

Property owners expect to pay property taxes; a value impact typically arises if actual taxes differ substantially from perceived “fair” taxes relative to the services provided. Research indicates that the value-depressing effect of property taxes can be offset if the market places sufficient value on the services provided by the tax.

An example of this is the local school tax rate. Studies consistently show that the value of homes in perceived “desirable” school districts is greater than similar properties located in “less desirable” school districts, even if the desirable local school property tax rate is higher. Families bid up the prices of homes to live in desirable school districts despite higher property taxes.

Buyers may also value other local services (such as fire and police protection, planning and code enforcement, road maintenance or other government services) or lower total state and local taxes higher than the “cost” of higher property taxes. If the market does not value the benefits of local services more than the cost of providing the services, the value depressing effects of higher taxes may be substantial, especially if actual taxes significantly exceed perceived “fair” taxes for the area.

The value impact of local property taxes may depend on how the market views the property tax relative to the total tax burden, which includes all other state and local taxes, collectively, on a per capita or percentage of income basis. If relatively high property taxes are offset by lower other taxes, any negative property tax value impact may again be reversed.

The 2004 per capita property tax collections show Texas ranked 14th nationally in property tax burden; however, with no state income tax and with other state and local taxes somewhat lower, Texas’ relative total local tax burden is substantially less than most other states.

Projected 2006 data indicate Texas ranks 36th in the total state and local tax burden per capita and 45th in total state and local tax burden as a percentage of income.

You may apply for homestead exemptions on your principal residence. Homestead exemptions remove part of your home's value from taxation, so they lower your taxes.

Read about available property tax exemptions at: http://www.window.state.tx.us/taxinfo/proptax/exmptns.html



How Texas lawmakers made history for 2006 and 2007

Even though we already have a low effective tax rate compared to other states
(as you see in the chart above), Texas lawmakers have made history by passing a huge property-tax relief program that takes effect for 2006 taxes and fully in 2007.

Gov. Rick Perry, Lt. Gov. David Dewhurst, House Speaker Tom Craddick and all the members of the Legislature worked together to pass comprehensive public-education and school finance reform that rewards teachers, reforms our schools, and provides a record 33% property-tax cut that will make homeownership more affordable for millions of Texans. The tax-reform package reduces the net tax burden by nearly $7 billion over the next three years by lowering public school maintenance and operation taxes in the 2006 tax year by $0.17 and an additional $0.33 in 2007. All revenue-generating items in the tax-reform package are dedicated 100% to property tax education. The tax-reform package also improves our tax system with a low-rate, broad-based business tax that is fair to all businesses. Finally, and perhaps most important, it gives Texas homeowners long overdue property-tax relief.

“This plan substantially improves the school finance system, provides a record $6 billion property tax cut for homeowners and employers, dramatically increases the state’s share of education funding, protects jobs, encourages investments in workers’ healthcare and pensions, and reforms the business franchise tax by broadening the base and closing loopholes. And it is a net tax cut of more than $1 billion starting in 2007.”

Key Benefits:
  • It will make home ownership more affordable for millions of Texans by providing $6 billion in property tax relief for homeowners and employers by 2007.
  • It will close loopholes and encompass a broader cross-section of the state economy, providing a fairer way to fund our children’s education.
  • It encourages businesses to invest in jobs and employee benefits with deductions for hiring and investments in worker health care and pensions.
  • It dramatically increases the state’s share of education funding.
  • Record Property Tax Relief:
  • More than $6 billion in annual property tax relief will be delivered to homeowners and employers by Tax Year 2007, with nearly $2 billion in property tax relief in Tax Year 2006.
  • It is a net tax cut of $1 billion in Tax Year 2006, and nearly $1.5 billion in Tax Year 2007.
Read more about Texas Tax Relief at http://www.governor.state.tx.us/priorities/tax_reform/TTRC_report



Tax breaks when selling your property.

Thanks to Internal Revenue Code 121, millions of U.S. home sellers enjoy tax-free benefits when selling their principal residences. Internal Revenue Code 121 is a very generous tax exemption up to $250,000 or $500,000 that can be used over and over but not more often than every 24 months for qualified home sellers.

Whether you own and live in a house, condo, cooperative apartment or other type of principal residence, you can qualify for Uncle Sam's most generous tax exemption. To be eligible, you must have owned and occupied your primary dwelling at least 24 of the last 60 months before its sale.

Single home sellers can qualify for up to $250,000 tax-free profits. A married couple filing a joint tax return can qualify for up to $500,000 tax-free capital gains if both spouses meet the occupancy test even if only one spouse's name is on the title.



Congress also creates new tax break for mortgage insurance for families with income of less than $100,000.

Households with annual income of $100,000 or less can get a tax break on their mortgage insurance when purchasing a home in 2007 using less than the traditional 20 percent down payment.

That's because a new tax deduction effective Jan. 1 will allow them to write off the full cost of their private or government mortgage insurance on their federal tax return.With rising interest rates and slowing home-price appreciation, insured loans are often the best deal for borrowers, according to the Mortgage Insurance Companies of America, a trade association representing the private mortgage insurance industry.

Mortgage insurance helps loan originators and investors make funds available to home buyers for low-down-payment mortgages by protecting lenders from a portion of the financial risk of default.

"Making the cost of mortgage insurance tax deductible helps those who need it most: low- and moderate-income Americans, primarily first-time home buyers, who are financially responsible but simply don't have the means to amass a 20 percent down payment," said MICA president Steve Smith.

On average, the new deduction is expected to save those eligible to claim it an average of $300 to $350 a year, said MICA spokesman Jeff Lubar.

The deduction applies to private and government mortgage insurance programs, such as VA and FHA-backed loans, Lubar said. Legislation creating the deduction was supported by consumer, business, taxpayer and civil rights groups, including the National Urban League, the National Taxpayers Union, the American Homeowners Grassroots Alliance, and the Cuban
American National Council.


The Texas Property Tax System: An Overview

A tax is a compulsory monetary contribution imposed by governments to pay for governmental activities.  Common taxes include income, sales and value-based taxes.  A property tax is assessed according to the value of property a taxpayer owns.  Because property taxes depend on value, they are called ad valorem, meaning "according to value." Property value presumably reflects its owner's wealth; therefore, market value demonstrates an owner's ability to pay.

Taxation  is the right of government to raise revenue through assesments on valuable goods, products and rights.  The U.S. Constitution prohibits the federal government from taxing real property directly.  Therefore, the right of property taxation is reserved for state and local governments.  These governments assess ad valorem taxes to pay for public services. In Texas, a tax lien is created on all taxable property on January 1 of each year.  This lien remains in effect until the property taxes are paid in full.  Property taxes become delinquent on February 1 of the year following assessment.

Homeowners frequently voiced frustration concerning large increases in taxable value because of revaluations.  The reforms adopted include a provision to limit growth in taxable property values for residence homeowners only. When Texas voters ratified this provision in November 1997, homestead value increases were confined to a cumulative 10 percent per year for each year since the last revaluation.

By Kenya - TexasGulfCoastOnline.com
References: Texas Comptroller,  Texas Governors Office and Texas Real Estate Center at Texas A&M

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