What Landlords Need to Know About Houston Property Taxes and Deductions
Houston landlords who want to protect their profits and stay on the right side of the law need to know about property taxes and tax deductions. Texas doesn’t have a state income tax, but it does have some of the highest property taxes in the country. This makes smart tax planning very important for rental property owners. Understanding what you owe, what you can deduct, and how to plan ahead can have a big effect on your bottom line.
This guide explains how property taxes work in Houston and what deductions landlords should know about.
How Houston’s Property Taxes Work
The Harris County Appraisal District (HCAD) sets the property taxes in Houston, and several taxing bodies collect them. These include:
- Harris County
- Houston, Texas
- Districts of schools
- Districts with special purposes, like flood control or utility districts
Every entity decides what its tax rate will be, and the total bill is based on the market value of your property.
When Property Taxes Are Due
- Most of the time, property tax bills come out in October
- You have until January 31 to pay your taxes
- If you pay late, you may have to pay extra fees and interest
Landlords should plan ahead because missing deadlines can quickly cost a lot of money.
Knowing the difference between appraised value and market value
HCAD’s appraised value may be different from what you paid for the property or what you think it’s worth. Landlords have the right to:
- Look over the yearly evaluations
- If you think the values are wrong, protest them
- Give proof, like sales that are similar or problems with the condition
If you live in a high-value neighborhood in Houston, you could save a lot of money on your taxes by challenging an assessment.
Common Exemptions from Property Taxes
Exemption for Homesteads (Only for Owners)
You might be able to get a homestead exemption if you live in the property. Most rental properties don’t qualify, but landlords who house-hack or live in a unit temporarily should check to see if they do.
Other Exceptions
Some properties might be able to get exemptions for:
- Ownership by seniors or people with disabilities
- Veterans (if needed)
These aren’t as common for rental properties, but they are worth looking at.
Important Tax Deductions That Houston Landlords Can Use
Landlords can deduct many costs that come with owning and running rental property, even though property taxes are an expense.
Taxes on property
As a business expense, you can usually fully deduct the property taxes you pay on rental properties.
Interest on a mortgage
You can deduct the interest you pay on loans you take out to buy or improve rental property. This is often one of the biggest tax write-offs.
Repairs and Upkeep
Expenses that can be deducted are:
- Fixing plumbing and electrical problems
- HVAC repair
- Controlling pests
- Taking care of the lawn and landscaping
Usually, you can write off routine maintenance costs in the year you pay for them.
Depreciation: A Strong Tax Break
Even if the property is going up in value, depreciation lets landlords deduct the cost of the property over time.
Important points:
- Residential rental properties lose value over 27.5 years.
- Depreciation can greatly lower the amount of income that is taxable
- It applies to the building, not the land
One of the best deductions for Houston landlords is depreciation.
Other deductible costs
Landlords can also deduct:
- Fees for managing property
- Costs of advertising and renting
- Fees for lawyers and accountants
- Insurance costs
- Fees for the HOA (if any)
- Owner pays for utilities
To get the most out of these deductions, you need to keep accurate records.
Best Practices for Keeping Records and Documenting
Good paperwork protects landlords during audits and makes sure they don’t miss any deductions.
Some best practices are:
- Keeping digital copies of bills and receipts
- Keeping your personal and rental property finances separate
- Keeping track of miles traveled for property-related trips
- Using professional services or accounting software
Clear records make it easier to file taxes and see your finances more clearly.
How property taxes affect the cost of renting
Landlords in Houston should include property taxes in their rent calculations. Rising assessments may mean:
- Changing the rent when the lease is up
- Making things more efficient to make up for higher taxes
- Reevaluating the strategy for long-term investments
Ignoring the effects of taxes can slowly eat away at profits.
When to Talk to a Tax Professional
The rules about taxes change, and no two properties are the same. It’s especially important to talk to a CPA or tax advisor when:
- Buying or selling rental property
- Making big changes
- Taking care of more than one property
- How to deal with depreciation and recapture
Getting professional advice helps make sure that you follow the rules and get the most out of your business.
How Home CoHost Helps Houston Landlords Make Money
It takes time and planning to keep track of property taxes, costs, and deductions. Home CoHost helps Houston landlords keep track of their finances, keep their records straight, and run their rentals smoothly. Home CoHost helps owners stay financially ready and set up for long-term success by helping with pricing strategy, coordinating maintenance, and running the property on a daily basis. You can find out more about professional property management in Houston at homecohost.com.
Landlords can make better decisions, lower their tax bill, and protect their long-term profits by knowing how Houston property taxes and deductions work. Taxes are not an unexpected cost when running a successful rental business if you plan ahead and get help from professionals.