How Texas Property Taxes Work: A Complete Guide for Homeowners

How Texas Property Taxes Work: A Complete Guide for Homeowners

Texas has no state income tax, which means local governments rely heavily on property taxes to fund schools, roads, police, fire departments, and other essential services. If you own property in Texas, understanding how the system works can help you manage costs and exercise your rights.

This guide explains everything you need to know about how Texas property taxes work.

Key Facts About Texas Property Taxes

• No state property tax — All property taxes are collected by local governments
• School districts collect the most — About 55% of your bill goes to schools
• Values are set January 1 — Your property is valued as of January 1 each year
• You have the right to protest — Every property owner can challenge their assessed value
• Taxes are due January 31 — Bills arrive in October and are due by January 31

Who Collects Property Taxes in Texas?

Unlike states with a state property tax, Texas leaves all property taxation to local governments. Your property tax bill typically includes charges from multiple taxing entities:

School Districts (~55% of your bill)

School districts levy the largest portion of property taxes in Texas. These funds pay for teacher salaries, facilities, transportation, and educational programs. The Texas Education Agency oversees how school districts set their tax rates.

Counties (~15-20% of your bill)

County taxes fund the sheriff's department, county courts, jails, road maintenance, and county hospitals. Your county appraisal district also uses these funds to operate.

Cities/Municipalities (~15-20% of your bill)

If you live within city limits, you'll pay city property taxes that fund police, fire departments, parks, libraries, and city infrastructure.

Special Districts (~5-15% of your bill)

Special districts include:

• MUDs (Municipal Utility Districts) — Water and sewer services
• Hospital districts — Public healthcare facilities
• Community college districts — Local community colleges
• Emergency services districts — Fire and EMS services

Each taxing entity sets its own tax rate, which is why your total tax rate is the sum of multiple rates.

How Property Values Are Determined

Your property tax bill is based on your property's appraised value. Here's how that value is determined:

County Appraisal Districts (CADs)

Every Texas county has a Central Appraisal District (CAD) responsible for determining the value of all taxable property within its borders. The CAD is independent from the taxing entities that collect the taxes.

Property values are assessed using mass appraisal techniques that analyze:

• Recent sales of comparable properties
• Property characteristics (size, age, condition)
• Location and neighborhood factors
• Cost to replace the structure
• Income potential (for commercial properties)

January 1 Valuation Date

Your property's value is determined as of January 1 each year. This means:

• Improvements completed after January 1 won't affect this year's value
• Market conditions on January 1 determine your assessed value
• Damage that occurred after January 1 won't reduce this year's assessment

Notice of Appraised Value

In April or May, you'll receive a Notice of Appraised Value from your CAD. This document shows:

• Your property's new appraised value
• Last year's value for comparison
• Exemptions applied to your property
• Instructions for protesting if you disagree

The 10% Homestead Cap

If you have a homestead exemption on your primary residence, Texas law limits how much your appraised value can increase each year.

Under Texas Tax Code Section 23.23, your homestead's appraised value cannot increase by more than 10% per year, regardless of market conditions.

Example:

• 2025 appraised value: $400,000
• 2026 market value: $500,000
• 2026 capped value: $440,000 (10% increase max)

This cap does not apply to:

• New construction or improvements
• Properties without a homestead exemption
• The first year you own the property

How Tax Rates Are Set

Each taxing entity sets its own tax rate annually, typically in August or September. The process works like this:

1. Entities Propose Budgets

School districts, cities, counties, and special districts determine how much revenue they need for the upcoming year.

2. Certified Values Are Calculated

The CAD provides each entity with the total taxable value of all property in their jurisdiction.

3. Tax Rates Are Adopted

Each entity calculates the tax rate needed to generate their required revenue:

Tax Rate = Revenue Needed ÷ Total Taxable Value

Voter-Approval Tax Rate

Since 2019, Texas law (SB 2) limits how much cities and counties can increase property tax revenue without voter approval. If a city or county wants to increase revenue by more than 3.5% (excluding new property), voters must approve the increase.

School districts have different rules tied to state funding formulas.

How Your Tax Bill Is Calculated

Texas property taxes are ad valorem taxes — meaning they're based on the value of your property. Your bill is calculated using a simple formula:

Property Tax = (Appraised Value - Exemptions) × Tax Rate

Step-by-Step Example

Let's say you own a home in Harris County:

Repeat this calculation for each taxing entity, then add them together for your total bill.

Understanding Your Bill

When you receive your tax bill in October, review each line item carefully. Verify:

• The property listed is actually yours
• Exemptions are correctly applied
• Values match your Notice of Appraised Value
• Tax rates are current

Exemptions That Reduce Your Taxes

Texas offers several exemptions that reduce your taxable value. The most valuable is the homestead exemption.

General Homestead Exemption

Available to all homeowners who use the property as their primary residence:

• School districts: $100,000 exemption (mandatory)
• Cities/counties: Up to 20% of value (optional, varies by jurisdiction)

Over 65 / Disabled Exemption

Homeowners 65 and older or with disabilities receive:

• Additional $10,000 school district exemption
• School tax freeze (taxes can't increase after age 65)
• Additional exemptions from other entities (varies)

Disabled Veteran Exemption

Veterans with VA disability ratings receive exemptions from $5,000 to 100% of value, depending on disability percentage.

How to Apply

File Form 50-114 with your county appraisal district by April 30. Once approved, exemptions renew automatically each year.

Your Right to Protest

If you believe your property's appraised value is too high, you have the right to protest your property taxes.

Why Protest?

• CADs make mistakes — Mass appraisal techniques can miss property-specific issues
• Market conditions change — Your neighborhood may not match county-wide trends
• Condition matters — Deferred maintenance or damage affects value
• Comparable sales vary — The CAD may have used inappropriate comparisons

The Protest Process

1. File a Notice of Protest by May 15 (or 30 days after your notice)
2. Attend an informal meeting with the appraisal district
3. Present your case at an Appraisal Review Board (ARB) hearing
4. Appeal if needed through binding arbitration or district court

What You Can Protest

• Appraised value (most common)
• Unequal appraisal compared to similar properties
• Exemption denials
• Agricultural or timber valuation denials

The Property Tax Calendar

Here's the annual timeline for Texas property taxes:

What Happens If You Don't Pay?

If you don't pay your property taxes by January 31:

• February 1: 7% penalty + interest begins accruing
• July 1: Additional 15-20% collection penalty may be added
• Ongoing: Taxing entities can file a lawsuit and place a lien on your property
• Eventually: Your property can be sold at a tax sale

If you're struggling to pay, contact your tax assessor-collector about payment plans before the deadline. For the full penalty schedule, see: What Happens If You Don't Pay Property Taxes in Texas?.

Frequently Asked Questions

How often are properties appraised in Texas?

By law, properties must be appraised at least once every three years. However, most urban counties reappraise annually due to rapidly changing values.

Can I protest my property taxes every year?

Yes. You can protest annually, and many homeowners do. There's no penalty for protesting, and even small reductions add up over time.

What's the difference between appraised value and market value?

In Texas, your appraised value should equal market value — the price your property would sell for on the open date as of January 1. If your appraised value exceeds market value, you have grounds to protest.

Do property taxes go down when home values drop?

Not necessarily. If property values drop county-wide, taxing entities may raise tax rates to maintain revenue. Your taxes depend on both value AND rate.

How do I find my property's appraised value?

Search your county appraisal district's website using your address or owner name. You can also find this on your Notice of Appraised Value or tax bill.

Take Control of Your Property Taxes

Understanding how Texas property taxes work is the first step to managing this significant expense. Key takeaways:

1. Apply for all exemptions you qualify for — especially the homestead exemption
2. Review your Notice of Appraised Value every year
3. Protest if your value seems too high — it's your right as a property owner
4. Pay attention to tax rates — they matter as much as values

Need help protesting your property taxes? Ballard Property Tax Protest handles the entire process for Texas homeowners. We only charge a fee if we successfully reduce your taxes.

Get Your Free Property Tax Review