When a property is under construction, that structure is valued based on the percent complete as of January 1st
of that Tax Year. Any structure on a property is considered an Improvement.
As reviewed in closing, the taxes are estimated by the
mortgage company, based off an incomplete value of the property. This often
leads to insufficient funds in the escrow account, causing the property owner to
need to pay more at the end of the year, to replenish the shortage. Often, the
mortgage company will increase the monthly payment amount to prepare for an
increase, the following year, and to pay back the shortage for the previous year.
BI and WSA
If there is a Builders Inventory or Waiver of Special
Appraisal on the property, these exemptions will be terminated at the end of that Tax Year.
Waiver of Special Appraisal (WSA) and Builders Inventory (BI)
Homestead Exemption
If a newly built residential property is purchased after
January 1, 2022, and qualifies for a Homestead Exemption, that Homestead
Exemption can be prorated. In this case, the Homestead cap adjustment would
apply after the first full tax year the Homestead Exemption was on the property.
"An owner who receives a prorated homestead exemption is
considered to have qualified for the homestead exemption as of January 1st of
the following year. Homestead cap
adjustment will only apply after the exemption is on the property one full year." Per Texas Property Tax Code Section 23.23(c-1).
For example, if a property is purchased after January 1, 2022, then, 2023 would
be the first full calendar year the Homestead Exemption was on the property,
therefore, 2024 would be the first year the property is eligible for the Homestead cap
adjustment.
If the property is not 100% complete by Jan 1, the "new value" added upon completion of the improvement will not be
included in the HS cap until the following year.
Please see the following articles for further information on
Exemption Requirements and the Homestead Cap Adjustment: