Understanding Property Taxes in Texas: What Homebuyers Need to Know

When buying a home in Texas, understanding property taxes is crucial for making an informed decision. Texas doesn’t have a state income tax, so property taxes play a significant role in funding local services like schools, roads, and emergency services. Here’s what homebuyers need to know about property taxes in Texas and what to expect as a new homeowner.

Property taxes in Texas are calculated based on the appraised value of your property and the tax rate set by local taxing authorities. The appraised value is determined by the county appraisal district (CAD), which assesses the market value of your home each year. The tax rate, often expressed as a percentage per $100 of property value, is determined by various local entities like school districts, cities, and counties.

Property Tax = Appraised Value x Tax Rate

 

For example, if your home is appraised at $300,000 and the total tax rate is 2.5%, your annual property tax bill would be $7,500.

In Texas, tax rates vary depending on where you live. Different areas have different needs for funding local services, which is why you’ll see variations in tax rates across the state. Generally, tax rates can range from 1.5% to 3% of the appraised property value. This means that it’s essential to consider the tax rate in the area where you plan to buy a home, as it can significantly affect your overall cost of ownership.

Texas offers several exemptions that can reduce your property tax burden. The most common is the homestead exemption, which lowers the taxable value of your primary residence. As of 2024, homeowners can apply for a $40,000 homestead exemption, which means if your home is appraised at $300,000, you’ll only be taxed on $260,000. 

•Over-65 Exemption: Additional exemption for homeowners aged 65 and older.

•Disabled Person Exemption: Additional exemption for homeowners with a disability.

•Veterans Exemption: Exemption for disabled veterans, which can vary based on the level of disability.

 

These exemptions are crucial for lowering your property tax bill, so it’s important to apply for any that you’re eligible for. 

As a new homeowner in Texas, you’ll receive an annual appraisal notice from your county appraisal district, usually in the spring. This notice will detail the appraised value of your property and give you the opportunity to protest the valuation if you believe it’s too high.

 

In the fall, you’ll receive your property tax bill, which is due by January 31 of the following year. Texas property taxes are collected on a county-by-county basis, and if your mortgage lender manages your property taxes through an escrow account, they’ll pay the bill on your behalf. However, it’s essential to verify that payment has been made to avoid penalties.

If you believe that your property has been overvalued by the county appraisal district, you have the right to file a protest. Protesting your property’s appraised value can potentially reduce your property tax bill. The process involves submitting a formal protest, attending a hearing, and providing evidence to support your claim, such as recent comparable sales in your neighborhood.

When budgeting for a new home, it’s important to account for property taxes. Since property taxes can vary widely across Texas, understanding the local tax rate and potential exemptions can help you better plan for your annual expenses. Additionally, keep in mind that as property values increase, your property taxes may also rise.