What to Know About Commercial Property Taxes in Texas
Texas is known for its strong business climate and lack of income tax, but that often means higher property taxes. For commercial property owners, understanding how these taxes work, how rates are set, and what strategies can reduce your burden is key to staying compliant and financially sound.
What Are Commercial Property Taxes in Texas?
What do Nevada, Ohio, South Dakota, Washington, Wyoming, and Texas have in common? They are the only states in the U.S. that don’t have corporate income tax.
Texas also does not levy a state income tax on its citizens. However, the state needs to raise funds somehow, and it does so through personal and commercial property taxes. Owners of commercial property in Texas will, no doubt, be aware of the taxes levied against their properties every year. So, how do taxes work on commercial property in Texas? Here are some of the key points you need to know about our state’s commercial property tax.
5 Core Rules That Govern Commercial Property Taxes
Texas has five basic rules applied to all property taxes in the state, both commercial and residential:
- Taxation must be equal and uniform: No single property should pay more than what can reasonably be expected from it. Your commercial property taxes are thus based on a standard assessment of the property’s value.
- Property must be taxed on its current market value: The market value is the price the property would likely sell for if you sold it today, under fair market conditions, where both the buyer and seller are somewhat seeking the best price, and there is no pressure to buy or sell.
- Each property must have a single appraised value: Various local governments that may have the right to tax you on your property cannot assign different values to your property. They must all use the same value.
- All properties in Texas are subject to tax unless they are eligible for exemption under state law.
- Property owners have the right to reasonable notice of increases in their appraised property value.
How Are Commercial Properties Assessed in Texas?
In Texas, commercial properties are assessed by local Central Appraisal Districts (CADs). Each CAD determines the appraised value of a property annually, which serves as the foundation for calculating your property tax.
The appraisal is based on the property’s current market value, i.e., the price it would likely sell for under typical market conditions. To determine this, CADs analyze several factors:
- Income potential (if the property generates revenue)
- Cost of replacing the property
- Market conditions
- Sales of comparable properties
- Physical characteristics and improvements made to the property
Once the appraised value is finalized, it’s multiplied by the local tax rate set by taxing entities to calculate the total property tax owed.
“More than 4,796 local governments in Texas — school districts, cities, counties, and various special districts — assess property taxes to fund local public services.” — Texas Comptroller
Understanding this process is key to knowing whether your valuation is fair and if it might be worth protesting. If your property’s appraised value seems inflated, you may be overpaying in taxes.
Do Different Commercial Property Types Have Unique Tax Valuations?
The short answer is, “Yes!” Let’s examine the three types of property vis-à-vis tax assessments:
1. Business Real Estate
This refers to the physical land and buildings that are used for commercial purposes, such as retail stores, offices, warehouses, and industrial sites. Value is determined by factors such as the size and condition of the property, its location, and the local real estate market.
2. Business Personal Property (BPP)
BPP is the tangible personal property used in a business’s operation, such as machinery, equipment, furniture, and inventory. Its value is affected by details like the age and condition of the property, its usefulness and function, and its replacement cost.
3. Mineral Property
Mineral property describes any land, mines, wells, or other natural resources that are capable of being extracted and sold, such as oil, gas, and minerals. Their value is assessed according to the quantity and quality of the resources, the current market price for the resources, the cost of extraction, etc.
How To Reduce Commercial Property Taxes in Texas
For commercial real estate owners in Texas, the property tax burden can be substantial. That’s because the Texas property tax system is driven by local governments, which set tax rates and collect property taxes based on the value of the property. Each county appraisal district determines how much a property is assessed, and the tax assessor-collector then bills accordingly.
To reduce your property taxes, business owners should consider working with experienced tax advisors. A professional can help you review the amount of property reported, confirm how your real property or business personal property is categorized, and evaluate whether the total tax rate is accurate for your location.
If you believe your commercial property has been overvalued, you have the right to file a tax protest with the county tax assessor-collector. This is often the most direct path to tax savings, especially if the amount of taxes owed appears inconsistent with market trends or comparable property within your jurisdiction.
Understanding how Texas property tax rates work and how local tax entities calculate them is key to managing your annual tax liability. Strategic review and accurate reporting can lead to measurable relief over time.
How Commercial Property Tax Bills Are Calculated
Understanding how your commercial property tax bill is calculated is key to managing costs and avoiding surprises. In Texas, your property tax amount is based on the appraised value of your property and the local tax rate set by various taxing entities (such as school districts, counties, and cities).
Here’s the basic formula used to determine your tax bill:
Taxable Value × Tax Rate ÷ 100 = Property Tax Due
What Are Appraisal Rolls and When Are They Certified in Texas?
An appraisal roll is the official list of all taxable properties within a jurisdiction, including each property’s appraised value. It’s compiled by the County Appraisal District (CAD) and used by local taxing units to calculate and issue property tax bills. This roll ensures consistency and transparency in how property values are assessed and taxes are levied.
In Texas, appraisal rolls are certified by July 20 each year. However, if more than 5% of the total appraised value is still under protest, certification may be delayed until that percentage drops below 5%.
When Are Commercial Property Tax Bills Mailed in Texas?
It may not be marked on your calendar, but knowing when tax bills are mailed saves you from severe penalties and interest on unpaid commercial property tax bills. While the rule of thumb is October or November, with payment due by January 31, the system varies from place to place.
Are There Exemptions for Business Property Taxes?
The Texas Comptroller notes that “Texas provides for a variety of exemptions from property tax for property and property owners that qualify for the exemption.” These exemptions can reduce your commercial property tax liability if your business meets certain conditions.
Common examples include:
- Disaster‑related exemptions for property that’s been damaged or destroyed by natural events.
- Agricultural and farm product exemptions for qualifying land or production equipment.
- Economic development abatements that encourage job creation and business investment.
- Historic property preservation exemptions that support the maintenance of qualifying landmarks.
Each exemption has specific eligibility rules and filing deadlines, so it’s important to review them carefully or consult a property tax professional to determine whether your commercial property qualifies.
How to File a Commercial Property Tax Protest
If you disagree with the appraised value of your property, you can file a protest with the Appraisal Review Board (ARB). The ARB is an independent panel that hears disputes between taxpayers and appraisal districts. You may need to get the help of a property tax attorney or protest firm to help you file your appeal successfully. Deadlines for protests are typically around May 15 or within 30 days of receiving the appraisal notice.
Best Practices for Staying Compliant with Commercial Property Taxes
The first step to compliance is to remain alert and cognizant of your property’s tax status. Stay up to date on the annual valuations, file any applicable protests in a timely manner, and plan your finances carefully to ensure that you have sufficient money set aside for tax payments. If you neglect any of these and find yourself falling behind on your tax obligations, you will face fines, penalties, and even a lien on your property.
Need Help Paying Commercial Property Taxes? AFIC Can Help
If you are struggling to keep up with taxes, you are not alone! It is something that nearly all business owners face at some point. That is why our team at American Finance & Investment Co., Inc. partners with commercial property owners across the state who need help paying their taxes.
We offer our clients an affordable, hassle-free way to ensure that your account with the local government tax office is paid in full and will work out a manageable repayment plan for you. AFIC can provide you with an instant quote by completing the form on our homepage. For qualifying properties, we can help you pay off your delinquent taxes and offer you the following benefits:
- Quick and completely online process
- No money down
- No credit check
- Free 30-day rate match
- Match competitors and beat their rate by 1%
- Avoid high penalties and foreclosure
We pride ourselves on finding solutions to suit the unique needs of our clients. If you would like to discuss our commercial property tax loans, please contact our experienced team at AFIC today.
