Thinking of retiring in Texas? Everything’s bigger in Texas! Seriously. It’s practically the state’s motto. Big hats, big sky, big architecture, big population, big football - even the state itself, which is the biggest in the contiguous U.S. Unfortunately, property taxes are no exception to the state’s reputation for largesse: Texas ranks number 7 (out of 50 states and Washington, D.C.) for the highest property taxes, with a 1.80 percent real estate tax rate (according to 2021 findings based on 2019 census data).
If you are considering retiring to Texas, your retirement plans will most likely include housing. You may decide to rent, but if you decide to purchase a house you will need to pay annual property taxes. Read on for more information and tips:
Texas Home Prices and Property Taxes
The average home price in Texas is currently $172,500, and the average annual property tax bill is $3,907. Compare that to the number 1 ranked state with the highest property taxes, New Jersey, where the average home price is $335,600 and the average property tax is $5,419, and number 51, Hawaii, the state with the lowest property taxes, where the average home is worth $615,300 but annual property taxes are only $606.
It’s worth noting that the state of Texas does not actually set or collect a property tax. Property taxes are levied at the county and local level, and the revenue helps provide funding for local services and infrastructure, like schools, municipal maintenance, roads, police and fire departments, libraries, and much more.
Let’s also remember that unlike other states, Texas doesn’t collect income taxes or charge a property tax on vehicles.
Planning on retiring in Texas? contact the team at pax financial group to see how we can help you make the transition.
As long as you own your property, you’re required to pay property taxes on it, according to its value assessed by a local tax assessor based on the value of similar homes in your area. Your property tax liability does not change when you retire.
In fact, this is one of the biggest arguments for those who lobby for property tax reform - that high property taxes often place an unfair and inequitable burden on retirees. In some cases, seniors who are unable to keep up with property-tax payments on their retirement income have had to sell their homes.
There are, however, some methods for relieving some of the pressure of property tax payments in retirement.
Since each Texas county sets its own property tax rates, the property taxes in some counties are higher or lower, on average, than others. In 2020, these Texas counties had some of the lowest property taxes in the state: Borden, Ward, Glasscock, Kenedy, and Crockett.
For comparison, the 2020 property tax rate in Borden was .34 percent, which rivals Hawaii’s .28 percent!
Factor property taxes into your retirement budget
Even though property tax reform is a topic of constant debate, especially around election time, it’s unlikely that property taxes will be eliminated anytime soon. A trusted financial advisor can help design a retirement plan that will include your monthly or annual property tax bills as well as your other expenditures.
If your home is paid off and your lender is no longer collecting your property tax payments monthly and holding them in escrow, remember to continue setting aside funds for your tax bills, which usually come once or twice a year.
If moving to another county is out of the question, perhaps you might think about moving to a smaller, less expensive home.
If you don’t really need a house with five bedrooms now that your kids have all grown up and moved out, why continue to pay property taxes on a five-bedroom house, when a one- or two-bedroom place would do just as well, and probably cost a heck of a lot less come property tax time.
You might even want to think about renting an apartment or condo. Maybe you’ll miss the joys of homeownership - cutting grass, shoveling snow, replacing appliances, fixing leaky faucets - or then again, maybe you won’t. But you definitely won’t miss paying property taxes because as a renter you’re not responsible for paying them - the property owner is.
Take advantage of senior benefits
If you decide not to relocate or seek out a humbler abode, you’ve still got options to help reduce your property tax burden.
Some counties in Texas offer property tax freeze or assessment freeze programs, which put a limit to the amount a qualifying individual’s school property taxes, or your home’s assessed value, can increase for those 65 and older. If you’re eligible for the property tax freeze program, and the school district lowers its tax rate your property taxes will go down, but if the tax rate increases it will not affect your tax rate once you qualified for the freeze. (Any significant improvements or additions to your property may trigger an exception to this limit.)
Texas also offers property tax deferral options for homeowners over the age of 65. You may be able to defer payment of your property taxes until after your death. Interest, charged at 5 percent, will accrue over time as well as the deferred property taxes, and your estate must settle up with the bill when your home is sold.
If the property you’re paying taxes on is your primary residence, you can take advantage of the homestead exemption regardless of your age, which can reduce your property value by at least $15,000, thereby reducing your property tax liability. Your local school district may offer additional exemptions of up to 20 percent of the value of your home.
Nobody likes paying taxes, and property tax is just about everyone’s least favorite because it’s so hefty, and usually comes as a shock even though you expected it. You know the old adage: Nothing in life is certain, except death and taxes. Now you know you’ve got to plan for both. But in Texas, you’ve got some options to ease the financial burden of property taxes, at least.
At PAX Financial Group, we are passionate about Texas and Retirement. We have decades of combined experience in helping families retire in Texas and nationwide. We take the time to discover what is most important to you and your loved ones and then custom craft a plan for your success.
Have you started thinking about retirement, but don't know where to begin? Do you have a retirement plan in place but aren't sure if it will meet your needs? We can help. Contact the team at PAX Financial Group and schedule a no-obligation conversation today!
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