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5 Things to Know About Commercial Property Tax Rates in Texas

As one of the fastest-growing metropolitans in the country, Texas brings a lot of opportunities when it comes to starting a business and owning commercial property. However, few business owners realize how commercial property tax rates in Texas work and how expensive it can be if they are left unpaid. Here are 5 things you should know about commercial property tax rates in Texas and how we can help.

1. Commercial Tax Rates Are Higher in Texas than Most Other States

Texas is known for having some of the highest property tax rates in the country. To make up for not having a state income tax, the property tax in Texas is used by local governments to help pay for public schools, libraries, city streets, fire protection, and many other local services. Because of this high demand, the government relies heavily on taxation, making commercial property tax rates higher. On top of tax rates being noticeably high in Texas, property values in the state are also on the rise, which further increases the property tax rates. In Texas, commercial real estate tax rates are higher than the national average at 1.83% rather than 1.08%.

2. How Commercial Differs from Residential Property Tax Rates 

Commercial properties tend to create a larger tax bill compared to residential properties by being based on the assessed value of the real estate. Since commercial properties generate income and are worth more than a standard residential home, they tend to have higher tax rates. This is known as the income approach. However, it’s worth noting that because of this, commercial tax rates will vary from business to business depending on the amount of income they generate.

3. How Commercial Property Values are Determined in Texas 

In Texas, the commercial property tax rates are applied to the full appraised value, meaning your property is assessed at 100%. The tax is based on what the property would sell for if a buyer or seller seeks the best price, known as the market value. 

The constitution and statutory law authorize more than 250 local governments to assess, collect and determine the use of property taxes. Each local government body will determine the amount of taxes they want to collect to establish its county’s individual tax rate. 

4. The Cost of Commercial Properties Rise 

Texas is known for its competitive residential and commercial real estate market as it continues to boom with commercial markets especially growing in Central Texas. As the demand for property continues and property values rise, so do tax bills. Even if the tax rate has little to no change, property taxes will still increase. Appraisers are particular about determining value in the high-demand real estate markets, deeming a higher property value. 

5. What to do If You Miss Your Property Tax Bill Deadline

With commercial property taxes in Texas being so high, it can be easy to fall behind on payments. If you do not pay your commercial property tax by the February 1st deadline, penalties and interest rates will be tacked onto your current bill. For instance, if you miss your tax bill deadline, a 6% penalty of the original tax bill will be taxed on the first month. After the first month of missed deadlines, there will be a 1% penalty rate added on each month along with an additional 1% interest rate.

If you are struggling to pay your commercial property tax bills or need help with cash flow on your business, a property tax loan may be the best option for you. At Johnson & Starr, we can help pay your commercial property tax bill so you can stay on track. We proudly serve Texas and Texans by providing flexible property tax loans to ensure you are never alone. If you want to learn more about our commercial property loans contact us today.