Understanding property taxes can be a challenge, even for those involved with real estate on a regular basis.
At AQUILA, we educate our investor, developer and corporate clients on the Austin market every day, and “what will my property tax rate be?” is a question that comes up frequently.
Property taxes are a major factor in any real estate decision. While some costs associated with a building can be negotiated or avoided (think insurance premiums or capital expenses), property taxes must be paid.
There are a lot of factors that affect property taxes, so to help answer this question, in this article we will examine:
- Who sets property tax rates in Austin
- Which jurisdictions can affect these rates
- How tax rates are calculated
- Where to find tax rates for your property
- And how property tax rates vary across the Austin metro
Who sets property tax rates?
The primary detail to understand about tax rates is that they are driven by the budget requirements of different branches of government. Because Texas has no state property tax, tax rate decisions fall under the control of a variety of local entities, which we will explain in detail later in this article.
Each entity has jurisdiction over properties in a specific area and can levy taxes on those properties to fulfill their budget requirements. To decide what the tax rate will be, each entity examines the value of the properties under their jurisdiction and sets the rate according to what percent of that total value their budget requires.
Unlike residential property, there is no limit to how much property taxes can change from year to year for commercial properties. With rates being reliant on budgets, they can sometimes increase dramatically. If a city or county decides to undertake a major development project, the additional monetary burden will likely be passed through to property owners. School districts are also one of the primary taxing entities in each area, so ISD bond proposals are often closely watched to see if they will lead to a significant increase in tax rates.
Which jurisdictions can affect these rates?
Your property may lie in several different jurisdictions. In Austin, your property is probably subject to taxes from some or all of the following entities:
- School District
- Emergency District
Additionally, sometimes properties fall within special districts. Some of these may include:
- Municipal Utility
- Water Control and Improvement District
TCAD (Travis Central Appraisal District) gives a great breakdown of how much each jurisdiction comprises your property tax total.
How Much of Your Taxes Go Towards Each Jurisdiction
|Water Control Improvement||0.70%|
School District Taxes
As you can see from the graph, the majority of property taxes come from school districts, and Austin is no exception. About 55% of your tax rate is likely levied by the school district your property is located in. Of the Austin school districts, Hutto ISD has the highest tax rate at around 1.7%, while Austin ISD had a tax rate of 1.2% in 2016.
Tax Rates by School District
|School District||2016 Tax Rate|
|Del Valle ISD||1.52%|
|Lago Vista ISD||1.32%|
|Lake Travis ISD||1.41%|
|Round Rock ISD||1.33%|
Another 17% of your tax rate is a result of county taxes. As indicated by the map below, Travis County had one of the lowest county tax rates in Central Texas in 2015 at .42%, and Falls County was the highest at .93%.
City taxes generally comprise approximately 16% of the tax total. The City of Manor has the highest rate in the Austin metro at .77% and the City of Bee Cave has the lowest at only .02%.
How are tax rates calculated?
Once rates have been set by every entity, property-specific rates can be found by taking the sum of all the rates for the jurisdictions a property is located in.
Because there are so many jurisdictions this is not always as straightforward of a calculation as you may think. Rather than taking the time to find the tax rate of each individual taxing jurisdiction, it’s better to look at tax rates at the property level.
How do I find the tax rate for a specific property?
With so many different jurisdictions playing a role in a property’s tax rate, it is often hard to say whether a property in one area will have a better tax rate than a similar property in a different area. Like real estate in general, every building has its own unique characteristics, and even being across a street can put a building in a completely different jurisdiction with a different tax rate.
Even if you ignore the location variable, some buildings may also have tax exemptions that will make them outliers in their area. Because of this, it is often better to visit the Travis County Tax Office or the Travis Central Appraisal District to get the most accurate estimate of what property tax rate to expect.
Once you are on the appraisal district’s website, the search process is very straightforward. Clicking on the “property search” button will take you to a searchable database of every property in Travis County.
To find a property, simply enter its address and you will be taken to a page that outlines the property’s owner, taxing jurisdiction, and many other useful details.
Clicking on the “taxing jurisdiction” tab will not only give you the property’s tax rate, but will also break the tax rate down by entity.
If you would like to expand your search outside of Travis County, we have included links to the appraisal districts of surrounding counties as well:
Where in the Austin metro area are tax rates highest?
While we recommend researching tax rates at the property level, we still wanted to do a broad analysis to give you an idea of how average tax rates vary across Austin and surrounding areas.
To do this, we compared the current tax rates for buildings in our Central Business District, Northwest, and Southwest competitive sets, and found that their average tax rates do vary slightly. The CBD had the highest average tax rate at 3.63%, while the SW had the lowest average rate at 3.18%.
Average Tax Rates for Competitive Set Office Buildings in Austin, Texas
|Submarket||Average Tax Rates|
|Central Business District||3.63%|
For specific data on property tax rates by building, hover over this interactive map:
If you are interested in getting more details on tax rates for property types other than office, contact us.
Need assistance understanding your property taxes?
Property tax rates can be one of the most important factors in real estate because they are often the largest portion of your property’s operating expenses.
For a deeper dive into how property taxes are affecting operating expenses in Austin, download our whitepaper, “What’s the Deal with all the Op/Ex?”.
Our brokers may not be able to change your tax rate, but they do have years of experience helping property owners and tenants understand the implication of these rates.
To get more specific questions answered about your Austin property and its taxes, schedule a consultation.
- What you need to know about TCAD’s latest appraisal values and 2017 Austin operating expenses
- Free Whitepaper: What’s the deal with all the Op/Ex?
 AQUILA’s competitive set is comprised of the primary buildings in each submarket, and is used to track market trends. A list of our competitive set buildings can be found in the appendix of our latest Austin Commercial Real Estate Market Report.