Texas Property Tax Guide for Homebuyers
How property taxes work in Texas and what they mean for your mortgage payment
In this guide:
Why Texas Property Taxes Are Higher
Texas is one of nine states with no state income tax, which is a significant financial advantage for residents. However, this means local governments fund public services—schools, roads, emergency services, and infrastructure—primarily through property taxes.
The average effective property tax rate in Texas ranges from approximately 1.60% to 1.80% of a home's assessed value, which is notably higher than the national average of around 1.10%. While this may seem steep at first glance, the absence of a state income tax often results in an overall tax burden that is competitive with many other states.
The Texas Tax Trade-Off:
- No state income tax: You keep more of your paycheck compared to states like California (up to 13.3%) or New York (up to 10.9%)
- Higher property taxes: Average effective rate of 1.60–1.80% vs. the national average of ~1.10%
- Net result: For many homebuyers, the overall tax burden in Texas is comparable to or lower than high-income-tax states
Understanding this trade-off is essential when budgeting for a home purchase in Texas. Your property taxes will be a meaningful part of your monthly housing costs, so accounting for them early in the process helps avoid surprises.
How Property Taxes Affect Your Monthly Mortgage Payment
When most people think about a mortgage payment, they picture the principal and interest portion. In reality, your total monthly payment—known as PITI—includes four components:
Your Total Monthly Payment (PITI):
- P – Principal: The portion that reduces your loan balance
- I – Interest: The cost of borrowing from your lender
- T – Taxes: Your property taxes, collected monthly and held in escrow
- I – Insurance: Homeowners insurance (and mortgage insurance, if applicable)
Most mortgage lenders require you to set up an escrow account. Each month, your lender collects one-twelfth of your estimated annual property tax bill alongside your principal and interest payment. The lender then pays your property taxes directly to the county when they come due.
In Texas, property taxes can add a substantial amount to your monthly payment. Here is an example of how this works on a $350,000 home:
Example: Monthly Payment Breakdown
$350,000 home, 20% down ($280,000 loan), 6.5% rate, 30-year fixed, 1.80% property tax rate
- Principal & Interest$1,770
- Property Taxes (escrowed)$525
- Homeowners Insurance (estimated)$200
- Total Monthly Payment~$2,495
As you can see, property taxes account for roughly 21% of the total monthly payment in this example. This is why it is critical to factor in property taxes—not just the mortgage rate—when determining how much home you can afford. Explore our Texas Affordability Guide for more details on budgeting for homeownership.
Texas Homestead Exemption
The homestead exemption is one of the most valuable tax benefits available to Texas homeowners. It reduces the taxable value of your primary residence, directly lowering your annual property tax bill.
General Homestead Exemption
As of 2024, all Texas homeowners who use their property as a primary residence are eligible for a $100,000 homestead exemption on school district taxes. This means $100,000 is subtracted from your home's appraised value before school taxes are calculated.
- •Eligibility: You must own and occupy the property as your primary residence on January 1 of the tax year
- •School taxes: $100,000 exemption from appraised value
- •County/city taxes: Many counties and cities offer an additional optional exemption (often 20% of appraised value)
- •Appraisal cap: Once a homestead exemption is in place, annual increases in appraised value are capped at 10% for homestead properties
Over-65 or Disabled Exemption
Homeowners aged 65 or older, or those with qualifying disabilities, receive additional property tax benefits beyond the general homestead exemption.
- •Additional exemption: An extra $10,000 exemption on school district taxes (on top of the $100,000 general exemption)
- •Tax ceiling: School district taxes are frozen at the amount due in the year the homeowner turns 65 or qualifies as disabled—your school taxes will not increase even if your property value rises
- •Tax deferral: Over-65 homeowners can defer (postpone) paying property taxes on their homestead, with interest accruing at 5% per year
How to File for Your Homestead Exemption
- 1.Determine your county appraisal district. Each Texas county has an appraisal district that manages exemptions. You can find yours at the Texas Comptroller's website.
- 2.Complete Form 50-114 (Application for Residential Homestead Exemption). Most appraisal districts accept online applications.
- 3.Provide required documentation: A copy of your Texas driver's license or ID showing the property address, and proof of ownership.
- 4.Submit by April 30 of the tax year for which you are applying. Late applications may be filed up to two years after the deadline.
Filing for your homestead exemption is free. Be wary of any company that charges you to file on your behalf.
Property Tax Rates by Major Texas Metro Area
Property tax rates vary across Texas because they are set by local taxing entities—school districts, cities, counties, and special districts. Below are the approximate average effective tax rates for major metro areas. Your actual rate will depend on your specific location within the metro.
Dallas
Dallas County and surrounding areas
Houston
Harris County and surrounding areas
San Antonio
Bexar County and surrounding areas
Lubbock
Lubbock County
Austin
Travis County and surrounding areas
These rates are approximate averages and can vary significantly within each metro area depending on the specific school district, city, and special districts that apply to a property. Always verify the exact rate for a specific address with the county appraisal district before purchasing.
Tips for Managing Your Property Taxes
While you cannot avoid property taxes, there are practical steps you can take to keep them as low as legally possible and avoid surprises in your monthly budget.
1. Protest Your Property Tax Appraisal
Every Texas homeowner has the right to protest their property's appraised value each year. The county appraisal district determines your home's value, and if you believe it is too high, you can challenge it.
- •Review your appraisal notice carefully when it arrives (typically in April)
- •Gather comparable sales data for similar homes in your neighborhood
- •File your protest by the deadline (May 15 or 30 days after the notice is mailed)
- •Attend the informal hearing—many protests are resolved at this stage
2. File Your Homestead Exemption Immediately
Do not delay filing for your homestead exemption after purchasing a home. The exemption can save you hundreds or even thousands of dollars per year. As noted above, you can apply as soon as you close on the property and move in. There is no cost to file, and the savings begin in the next tax year.
3. Factor Property Taxes Into Your Home-Buying Budget
When determining how much house you can afford, do not focus solely on the list price or the interest rate. Use the full PITI payment—including estimated property taxes—to ensure you are comfortable with the true monthly cost. A home in a lower-tax area may be more affordable overall than a similarly priced home in a higher-tax district.
4. Understand Escrow Adjustments
Your lender conducts an annual escrow analysis to ensure they are collecting enough to cover your property taxes and insurance. If your property value (and therefore your tax bill) increases, your monthly escrow payment will be adjusted upward.
- •Escrow adjustments typically happen once per year
- •Your monthly payment can increase even if your interest rate is fixed
- •A successful tax protest can help minimize these annual increases
Frequently Asked Questions
Why are Texas property taxes so high?
Texas has no state income tax, so local governments rely heavily on property taxes to fund public services like schools, roads, emergency services, and infrastructure. This trade-off means higher property tax rates compared to states that levy an income tax, but it also means Texans keep more of their earned income.
How do property taxes affect my monthly mortgage payment?
Most lenders require an escrow account that collects property taxes as part of your monthly mortgage payment. Your total monthly payment (known as PITI) includes Principal, Interest, Taxes, and Insurance. For example, on a $350,000 home in Dallas with a 1.93% tax rate, property taxes add roughly $563 per month to your mortgage payment.
What is the Texas homestead exemption and how do I apply?
The Texas homestead exemption reduces the taxable value of your primary residence. As of 2024, the general homestead exemption removes $100,000 from your home's appraised value for school district taxes. You can apply through your county appraisal district, typically by filing Form 50-114. You must own and occupy the home as your primary residence by January 1 of the tax year.
Can I protest my property tax appraisal in Texas?
Yes, Texas homeowners have the right to protest their property tax appraisal every year. You must file a protest with your county appraisal district by May 15 (or 30 days after your appraisal notice is mailed, whichever is later). Many homeowners successfully lower their appraised value by presenting comparable sales data or evidence of property condition issues.
When are Texas property taxes due?
Texas property taxes are due by January 31 of each year for the prior tax year. Tax statements are typically mailed in October. If your taxes are escrowed through your mortgage, your lender handles the payment on your behalf from the funds collected monthly.
Need Help Understanding Your Total Mortgage Payment?
Our mortgage advisors can walk you through exactly how property taxes will affect your monthly payment and help you find the right loan for your budget.