Is There a Difference? : Real Estate Taxes vs. Property Taxes
Real estate taxes vs. property taxes - aren’t they the same thing? Well, sometimes. The two terms are often used interchangeably, but they have different essential meanings, and there are certain situations where property taxes are not the same as real estate taxes. This short guide will help you understand the difference.
What Is Property Tax?
By definition, a property tax is a payment made to the government on any property you own, be it land or a car, any property movable or immovable. Property tax is thus a more general term than real estate tax.
What Is Real Estate Tax?
Real estate taxes are the annual payments you make to the government for your land or property. We use the term ‘immovable land’ to apply to any plot, building, house, or land that cannot be removed. The government uses the funds raised from real estate taxes to pay for services such as schools, infrastructure, and safety and security.
What we refer to in Texas as “property tax” is essentially the same as what other states and the IRS refer to as real estate tax, which is why there is often confusion over the two terms. When the two terms are used properly, real estate tax is a tax on immovable property, and property tax is a more general levy on all types of property. If we want to make a more precise distinction, then we would distinguish between real estate tax and personal property tax.
How Are Real Estate Taxes Calculated in Texas?
Real estate taxes in Texas are calculated by multiplying a property’s assessed value by the applicable tax rate, which is expressed as a rate per $100 of assessed value. So, for example, if your property is assessed at $250,000 and your combined tax rate is $2.50 per $100 of value, your annual tax bill would come to $6,250.
Texas does not have a single statewide rate. Instead, each local taxing unit, such as a city, county, or school district, sets its own rate independently. In many cases, a property owner will have multiple taxing units applying their respective rates to the same property, meaning the total tax bill is a combination of all those rates. According to Texas Policy Research, there are over 4,796 local taxing units in Texas.
Texas law also requires that taxing units follow a Truth in Taxation process, which means they must make proposed tax rate changes publicly available and give property owners the opportunity to respond before rates are adopted. This provides property owners with some visibility into how their tax bills are determined each year.
Why Are Real Estate Taxes and Property Taxes Separate?
In Texas, the term “property tax” commonly refers to taxes on real estate, including homes and land. While the terminology can vary, what matters most for homeowners is staying compliant with real estate tax requirements. To avoid penalties or legal action, it’s important to file and pay accurately and on time, paying close attention to all deadlines. Be aware of your assessment notices, review your property value carefully, and file any appeals as soon as possible if needed. Property tax bills are typically issued in October, and payment is due by January 31 each year.
Get Help With Your Texas Property Taxes
If you should fall behind on any of your real estate property taxes in Texas, help is available. Your best course of action is to acquire a property tax loan from American Finance and Investment Co., Inc. (AFIC).
AFIC. is a financial institution based in Texas. We offer property tax loans to Texas real estate owners to enable them to settle their debts to their local tax authorities. In light of the discussion above, it should be noted that AFIC deals only with real estate taxes. We do not finance personal property taxes. AFIC has been serving the financial needs of residents in Texas communities since 1946. With nearly eight decades of complaint-free consumer financing, we stand out as the first choice when it comes to manageable solutions for your tax debts.
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 we 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. Now that you have a better understanding of real estate taxes vs. property taxes, if you would like to discuss our property tax loans, please contact our experienced team at AFIC today.
Frequently Asked Questions
Texas uses the term property tax to refer to what the IRS and most other states formally call real estate tax. This difference in terminology can be confusing, particularly for property owners who move between states or file federal tax returns. Understanding that the two terms refer to the same obligation in a Texas context helps property owners navigate their tax responsibilities accurately. If you are unsure how this affects your obligations as a Texas property owner, the team at AFIC is available to help.
A local tax assessor evaluates each property annually to determine its tax assessment value. This process considers factors such as the size, location, age, and condition of the property, as well as recent sales of comparable properties in the area. The resulting assessed value is then used alongside the local tax rate to calculate the amount owed each year.
Market value refers to the estimated price a property would sell for under normal conditions, while assessed value is the figure assigned by a local tax assessor for the purpose of calculating taxes. In many cases, assessed value is lower than market value. The assessed value, rather than the market value, is what determines the amount of real estate tax a property owner owes each year.
Both residential and commercial properties are subject to real estate taxes in Texas, assessed on the value of the immovable property. Commercial property owners may also be subject to additional tax obligations on movable assets depending on the nature of their operations. Residential owners are generally only responsible for real estate taxes unless they operate a business from the property.
No. In Texas, real estate tax applies to immovable assets such as land and buildings, while personal property tax applies to movable assets owned by businesses, such as machinery, equipment, and office furniture. Although both are assessed and billed on a similar annual schedule, they are distinct obligations with separate filing requirements and apply to different categories of owned assets. If you have fallen behind on your real estate taxes, AFIC can help you get back on track with a manageable repayment plan.
