Austin Real Estate Blog

So the new tax rates for Austin real estate have been released. I have been getting alot of questions about Austin taxes recently so I figured I would write a blog to explain some of the recent changes.

Since property values have gone up quite a bit, some people were expecting hefty increases in their property taxes. Since property tax bills have been sent out some people have been surprised that their property taxes did not go up that much. The reason for this is that the tax rate for Austin has decreased. The full list of Austin Tax Rates for 2006 are located here

To start off, let's look at the tax rate for this year compared to last. I'm going to look at the property taxes for a house in the Austin ISD, which is most houses in central Austin.

In 2005, the tax rate was:

2005
Austin ISD 1.6230
City of Austin .4430
Travis County .4993
Travis County hospital district .07790
Austin Community College .0991
Total 2.7423

In 2006, the new tax rate is:

2006
Austin ISD 1.4930
City of Austin .4126
Travis County .4499
Travis County hospital district .0734
Austin Community College .0965
Total 2.5254

Overall the tax rate decreased by about 9.2 percent. There are two main things which led to a lower tax rate.

First is the lowered school tax rate. School taxes generally compromise the largest part of ones property taxes. The state finally lowered school taxes by increasing taxes on businesses. The taxes for Austin ISD went from 1.6230 to 1.4930. The good news is that the school taxes are scheduled to be phased in over two years. This year the taxes were to be reduced by 0.13. Next year they are scheduled to be reduced again but this time by .33.

The next thing that was reduced was city related taxes. This includes: 1) the city of Austin tax which was reduced from .4430 to .4126, 2) The Travis county tax which was reduced from .4993 to .4499, 3) the hospital district which was reduced from .0779 to .0734, and 4) the community college tax which was reduced from .0991 to .0965.

So why were all four of these tax rates reduced? The answer is basically that average real estate values in Austin went up. Generally as real estate values go up, tax rates can go down and vice versa. Why is this? If you have a town of 1000 people whether the average house is 100k or 1 million you still need about the same amount of city infrastructure. Regardless of the house prices you need about the same number of roads and the same number of fire stations and the same number of police stations.

This explains why the city tax rate went down this year as the property values went up. This also explains the city tax rates for a few other cities in Travis country in the general Austin area. The cities are listed from lowest to highest tax rates. One can see that the relationship to house prices is roughly the inverse.

And just because Im a dork I made this relationship graph where I plotted the different cities.

There are some exceptions but in general cities with higher average house values tend to have lower city taxes. Again, this is because someone in a million dollar house and someone in a 80k house tend to use about the same amount of city services such as roads, fire departments and police departments. Pflugerville has high taxes because the houses tend to be less expensive. To pay for the basic public services you need to tax each house more. On the other hand, West Lake has pretty expensive houses and can have a low tax rate to pay for the same basic public services.

So in summary. Austin property values went up. This allowed Austin to lower the tax rate. OK thats my blog. A bunch of talk about taxes.