Excise Tax In Dallas

22 Replies

I just downloaded Brandon Turner's spreadsheet calculator and was going down the list and saw excise tax. For those familiar with the Dallas market, what is the excise tax on the sale or property here? Is it the same 8.25% like regular purchases?

There are no transfer taxes on Real Estate in Texas. 

I love Texas!

That's great news! Thanks!

Just make sure you get a good handle on your property taxes. They are high here.

Originally posted by @Josh James:

Just make sure you get a good handle on your property taxes. They are high here.

And as an investor you can't get the homestead exemption which really helps on the school taxes in most places.  one interesting thing if you are flipping is that, at least for the properties I have bought, your first years taxes are at the rate of the owner as of the First of January.  That means if you are buying from an owner occupant that you can get credit for their homestead exemption and if the owner had other perks like frozen taxes for being over 65 in some counties you get the frozen rate that first year.  Be careful because there can be a big jump in taxes if you hold into the next tax year though because you lose all that and the property usually gets bumped to market rate. 

We have sometimes been able to work with the appraisers to get the appraisals lowered on our buy and hold rentals by taking in our purchase contracts and arguing for an appraised value closer to the purchase price.   Some counties are more receptive than others and some argue that purchases of foreclosures are not the true market value.  it is worth the effort because it can save you a couple hundred a year in taxes or more.  If you plan to flip you probably want to keep high county appraisals though. 

@Josh James  & @Paul Ewing  

Thanks for the heads up. I visited a couple of county sites and see most property taxes are around $3500 or so per year. But I'm not sure if this includes the homestead or not. 

Where can I learn more about this?

Originally posted by @Brandon G.:

@Josh James  & @Paul Ewing 

Thanks for the heads up. I visited a couple of county sites and see most property taxes are around $3500 or so per year. But I'm not sure if this includes the homestead or not. 

Where can I learn more about this?

Brandon I think showing you and example might help.  Go to this link:

http://www.dallascad.org/AcctDetailRes.aspx?ID=26605500060060000

Which should pull up Smith Joe living at 4446 WIND RIVER LN in Garland.  If not you can search and find it.  Here you can see the legal description you will need when making an offer, the owner's name and address if different than property address, the year it was last evaluated, and some general info about the house and lot.  Note the current Market Value.  That is what you will be paying taxes on if you hold the place past Jan1 of the next year (and make no major improvements).

Scroll down to the table labled "Exemptions (2014 Certified Values)".  Here you will see all of the taxing entities and the exemptions currently on the property.  This is a good example since it has both Homestead and Over 65.  I am guessing they give an exemption for over 65 in Dallas instead of freezing taxes like they do around me.  This looks like it is better.  Anyway, you can see that for each Exemption, a certain dollar amount is taken of the Market Value resulting in a significantly lower Taxable Value for each taxing entity.  The amount of the exemptions varies per taxing entity.

In the next table "Estimated Taxes (2014 Certified Values)" you can see what the taxes are for the year in which you buy.  At least in Wise, Parker, and I believe Tarrant the exemptions on the property as of January 1 will apply for the whole year even if sold.  I am not sure if Dallas does this, but figure they do. A quick call to the Appraisal District will answer that question for you.  Anyway to see what you will pay, just use the Market Value from the top of the page in place of the Taxable Value and multiply it by the Tax Rate per $100 (remember to divide by the Market Value by 100 to avoid heart attack).    If you plan on doing major improvements that will raise the Market Value above what is currently there try with those figures also to see how bad taxes might hurt.

This is mostly for Buy and Hold people, but if you are flipping over the winter it can bite you too especially if it takes several months into the new year to get the sale since you are responsible for the pro rated taxes for the year when you sell.

@Paul Ewing  

@Brandon G.  

In Dallas County there are only a small % of the total properties that go through a formal reappraisal every year.  The rest just have a market value appreciation factor applied, so the probability that a property you're rehabbing will be formally reappraised is extremely low.  Also, the DCAD site has some great materials that list all the tax rates for the various taxing entities throughout the county. 

I guess there are some good things about living in the big cities.  Wise County is pretty money grubbing and drives by everywhere looking for changes and even scourers Google Earth looking for that hay barn you build over the hill in back of a 60 acre farm so they can get it added to the improvements value.  Nothing like arguing about if an old farmhouse with holes in the floors, no water or electric is a habitable structure, storage, or just a pile of rotting lumber.

@Hattie D. ,

Paul mentioned that in certain counties exemptions on a property as of January 1st are good through the rest of the year even if sold. Do you know if this is the case in Dallas, Collin and/or Rockwall counties?

Texas needs to pass their own PROPOSITION 13, like California did.  All of my Texas properties take 2-4 months rent just to pay the Property Tax.

@Brandon G.  Hmmm...that's an interesting question, and I'm not sure of the answer.  I'm guessing, but I believe the exemptions do stay with the property for the remainder of the year, since the tax "bill" is determined on Jan 1 for the year.  That would make sense.

@Mike M I'll stick with our property taxes and no cities or the state worried about bankruptcy!  We actually have budget surpluses, businesses that want to move here and a distinct lack of regulations compared to CA.

Property taxes in Texas are some of the highest in the country however we do not have a State Income tax.  The out of state investor does not benefit from no state income tax so there is no "perceived" trade off for y'all and there is for an in state investor

512-293-3885
Originally posted by @Mike M:

Texas needs to pass their own PROPOSITION 13, like California did.  All of my Texas properties take 2-4 months rent just to pay the Property Tax.

Mike, the problem with that is that Texas doesn't have a state income tax. As such, it would be difficult to pass.

Reform also depends on where you are standing. In Garden Grove, you're probably not terribly concerned about the toll road madness in the Dallas area. As a family with 4 cars, we have spent up to $280 in a month on tolls just getting to work and living our lives.

Don't get me wrong, I'd love to see some limitations on tax growth. And frankly, more people would probably stake out your position on property taxes.

@Hattie D.

I'm with you, Hattie. When I left California in the late 90s, there was an actual industry that moved companies from California to Nevada. 

I was born, raised and lived 30 years in southern California. It's a beautiful state. I also know, having been involved in a family business there for years, the state is pretty hostile to business. Overall, to California state and local governments, business is an area to be shaken down, grabbed the ankles, turned upside down and shaken to see what can come out.

I couldn't help but laugh when I saw Toyota was moving its US headquarters here. I believe some other company, smaller but still about 400 jobs, also moved here from California. Texas is the economic frontier California was 30-40 years ago. While we don't have the beautiful beaches and mountains, I am still happy to live here. It would literally take winning the lottery for me to move back to California where the rest of my family lives.

Originally posted by @Brandon G.:

@Hattie D. ,

Paul mentioned that in certain counties exemptions on a property as of January 1st are good through the rest of the year even if sold. Do you know if this is the case in Dallas, Collin and/or Rockwall counties?

 Brandon: I am 99% certain that is the case in Collin County. I remember we moved in our house in early 2000, did the homestead exemption some time later that year and were told it was retroactive to January 1.

Originally posted by @Brandon G.:

@Josh James  & @Paul Ewing  

Thanks for the heads up. I visited a couple of county sites and see most property taxes are around $3500 or so per year. But I'm not sure if this includes the homestead or not. 

Where can I learn more about this?

 Brandon: using Collin County as an example, I would go to collincad.org and do a address property search on the specific property you are looking at. It should tell you line-by-line the taxes and exemptions of a given property. It will list things like over 65 and Homestead. If you see a $15,000 deduction from the appraised value on the Homestead line, then you know they are getting the exemption. You have to just follow the math, it doesn't explicitly say which exemptions the owner is claiming- I'm pretty sure, anyway.

The reason California passed Proposition 13 was that we were seeing the elderly being Property Taxed right out of their homes!  It was getting to the point where people were paying MORE in one year of Property Tax than they paid for the house to begin with.  While California is a horribly governed state, millions of seniors have been able to stay in their homes after they retire.

To put the state and local tax burden solely on property owners is immoral and irresponsible.  And it is a FALLACY to claim that tenants pay the property tax.  If my Property Tax goes up, I cannot raise my rent by that amount, rent and PT are mutually exclusive. 

As for Road Tolls, I will trade California Gas Tax for road tolls all day long.  I paid $3.99 a gallon yesterday. 

Don't get me wrong, i love my Texas rentals and I have several.  But Texas properties make up about 30% of my portfolio but is 80% of my annual Property Tax expense.  That is really lopsided.

Finally, if Texas has surpluses , why did my current year PT go up so much?  They should have gone down!

"The reason California passed Proposition 13 was that we were seeing the elderly being Property Taxed right out of their homes! It was getting to the point where people were paying MORE in one year of Property Tax than they paid for the house to begin with."

 Parts of Austin are going this way now. What was a $100k neighborhood is becoming a $500k neighborhood.  I talked to a state senator about the gentrification happening a mile east of the capital, and the first thing he brought up is people being forced out because of property taxes.  However, since the problem is not systemic, I doubt we are going to see a TX proposition 13. 

With a pro tax majority in the CA legislator it's only a matter of time before Prop 13 is dust in the wind ... Major Threats to Proposition 13 and Homeowners

We lived in CA for 15 years and prop 13 has done a lot of damage to the sate.  Rather then hold the legislature accountable for keeping taxes low of everyone the people of CA have decided it's just easier to stick it to the new guy.

On our block the people across the street were paying $900 in property taxes,  We had the same floor plan (bought in 1996) and were paying $4,500 and the lady that bought when we moved in 2007 is now paying @$12,500.  Rather then fight for everyone they just stick it to the new guy.   

When we outgrew our house it was cheeper to move to AZ then stay in California.  Our property taxes went down to $3,500 and we doubled the size of our house and had A LOT of money left over.  If we had stayed in CA we would have had to borrow 400k instead of having a paid off house, and our property taxes would have been over $17,500 a year.

And then there is what I call the "Landed Gentry"  kids can inherit the tax basis from their parents.  I had friends who had parents with rental houses, they sold the rental to their kids at the low $900 a year tax basis and they lived like kings.  No need to pay taxes, just let your chump neighbor pay for you.  Remodel and your house to be worth $1,400,000 but leave one wall standing and your taxes might get bumped to $3,500 a year not the 17.5k the someone off the street pays to buy a similarly remodeled house.

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