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Why Are Commercial Property Taxes So High in Texas

Why Are Commercial Property Taxes So High in Texas?

Discover the reasons why commercial property taxes are exceptionally high in Texas and explore the benefits of selling commercial property as a savvy solution to avoid the financial strain. Understanding the Texas commercial property tax system and the contributing factors to these elevated taxes is key to property owners and investors alike. 

This in-depth article provides insights into the causes behind Texas’ high commercial property taxes and highlights the advantages of considering the sale of commercial properties.

Understanding the Factors Contributing to High Commercial Property Taxes in Texas

Texas property taxes rank among the highest in the nation. As of 2023, the average property tax rate in Texas is 1.80%, compared to the national average of 1.07%.¹ The financial burden for commercial property owners is enormous if things aren’t always running smoothly. 

To understand the reason behind this, you need to know the Texas property tax system and the various elements that contribute to these inflated taxes. Let’s take a peek at the reasons behind high property taxes in Texas and the strategic advantages of selling commercial property.

Why Is the Texas Property Tax System Different?

Property taxes are important in financing local government entities and public services throughout Texas. Unlike many other states, Texas doesn’t have a state income tax. The result is increased reliance on property taxes as a primary source of revenue. Property taxes in Texas account for about 44% of local revenue.² Consequently, property tax rates in Texas are notably higher when compared to states with more diversified tax structures.

Which Factors Drive High Commercial Property Taxes?

Several factors contribute to the exorbitant property taxes in Texas. The state’s rapid economic growth and population influx have driven property values upwards, leading to higher assessments. 

Texas has experienced a population growth rate of 15.9% from 2010 to 2020, one of the highest in the country.³ Additionally, the absence of a state income tax requires the funding of public services through property taxes.

Understanding the Texas Property Tax System

The property tax system in Texas operates through a decentralized approach. Different tax entities receiving funding from property taxes, including: 

  • Cities
  • Counties
  • Special districts

Consequently, property tax rates vary based on the location and type of property you own.

Property Tax Assessment and Appraisal

Property tax assessment in Texas involves determining the market value of properties on an annual basis. Local appraisal districts use various methods, such as market comparisons and income potential evaluations, to appraise properties for tax purposes. It’s common for property owners to dispute these appraisals and protest assessments that they deem inaccurate.

What Are the Implications of High Property Taxes on Commercial Property Owners?

The substantial property taxes have a big impact on commercial property owners. These affect profitability and influence investment decisions. In recent years, the surge in property taxes in Texas has prompted many business owners to reevaluate their property holdings. Commercial property tax bills in Texas rose by an average of 18% from 2021 to 2022​.⁴ 

The burden imposed by these taxes provides a strong incentive for selling commercial properties. This is more relevant when considering the financial benefits of selling against ongoing tax liabilities.

Property Tax Rates Variances in Texas

Property tax rates in Texas differ depending on the property type and location. For instance, property tax rates vary among counties due to diverse local government needs and funding requirements for public services. 

Harris County has an average property tax rate of 2.09%, while Travis County averages around 1.98%​.⁵ Similarly, property tax rates vary at the city and school district levels, reflecting localized demands for education and infrastructure. 

Property Tax Exemptions and Relief

There are tax exemptions available for commercial properties in Texas, although they are less common and more specific compared to residential property exemptions. Here are some of the exemptions that may apply:

  • Freeport
  • Pollution Control Property
  • Economic Development
  • Historical Property
  • Solar and Wind-Powered Energy 

Qualifying for these exemptions often requires meeting specific criteria and going through an application process. All of this means more bureaucracy and potential headaches!

What Are the Challenges and Opportunities for Commercial Property Owners?

Property tax abatement programs in Texas offer some relief by reducing taxes for a specified period, typically as an incentive for development or investment. The Texas Economic Development Act offers tax abatements for businesses that create jobs and invest in local economies. Additionally, property tax freeze programs benefit eligible properties, albeit with limited scope. 

Ongoing discussions surrounding property tax reform in Texas hint at potential changes that could alleviate the tax burden. Nevertheless, selling commercial properties remains a viable option.

What Are the Benefits of Selling Commercial Property?

Considering the high property tax rates for commercial properties in Texas, selling gives financial relief. Comparing property tax rates with neighboring states like Louisiana (0.53%) and Oklahoma (0.87%) highlights Texas’s higher tax burden.⁶

Utilizing tax calculators for property taxes in Texas help property owners gauge potential savings. Furthermore, the current high property values create an opportunity to capitalize on investments and avoid future tax increases.

Partner with Point Acquisitions

Are you tired of dealing with the stress and financial burden of Texas’s high property taxes? Let Point Acquisitions help you. Contact us today for a no-obligation offer within 72 hours. We specialize in reducing the worry and hassle associated with managing exorbitant property taxes. Why not focus on what matters most for a change? Reach out to Point Acquisitions now and discover how easy it is to relieve yourself from the headaches of high property taxes in Texas.

In Conclusion

Property taxes in Texas are primarily driven by economic growth, population increases, and state policies. While these taxes serve to fund vital public services, they create a burden for property owners, particularly those with commercial properties. Selling commercial property is a strategic move to alleviate this burden, capitalize on current market values, and simplify financial management.

  1. Property Tax Rates in Texas 2023
  2. Texas Property Tax System Overview
  3. Texas Population Growth 2010-2020
  4. Commercial Property Tax Increases in Texas
  5. Harris County Property Tax Rates
  6. Property Tax Comparison in Texas

About The Author

Jesse Shemesh

With a wealth of experience in nurturing diverse commercial real estate investment portfolios across multiple markets, I actively engage in the development and execution of deals spanning all asset classes. My expertise lies in collaborating with strategic partners, including corporate real estate professionals, fund managers, developers, and investors, to source, identify, and entitle opportunities. At Point Acquisitions, we take pride in our unique, proprietary platform that specializes in property acquisitions, generating a steady stream of organic deal flow that sets us apart from the competition. As a seasoned professional in the real estate industry, I am dedicated to creating lasting partnerships and delivering exceptional results for all stakeholders.


Please note that Point Acquisitions is not a tax expert or tax advisor. The information on our blogs and pages is for general informational purposes only and should not be relied upon as legal, tax, or accounting advice. Any information provided does not constitute professional advice or create an attorney-client or any other professional relationship. We recommend that you consult with your tax advisor or seek professional advice before making any decisions based on the information provided on our blogs and pages. Point Acquisitions is not responsible for any actions taken based on the information provided on our blogs and pages.

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