Understanding Property Taxes: Homeowner Guide to Rates and Costs

When budgeting for a new home, it is important to plan for more than the monthly mortgage payment. Property taxes are one of the biggest ongoing housing costs for many homeowners, and understanding how property taxes work can help you estimate monthly expenses, compare communities and prepare for long-term homeownership with more confidence.

Especially if you are a new homeowner, you probably are not very familiar with this significant expense. In 2024, single-family homeowners in the United States and D.C. paid an average of $4,300 in property taxes.

Understanding property taxes will help future homeowners budget more efficiently, and live comfortably within their means in their new home. Buyers who are just getting started may also find this list of first-time homebuyer terms helpful when reviewing tax documents, escrow details and closing paperwork.

If you are planning your full homebuying budget, this guide on how closing costs are determined for homebuyers can help you account for other expenses that often appear alongside property taxes.

Key Takeaways

• Texas property taxes depend on value, exemptions, and local rates.
• County records help buyers find property taxes before purchase.
• Homestead exemptions can reduce taxable value for Texas owners.
• Property taxes can rise when values or local tax rates increase.

Understanding property taxes—an overview

Property taxes are annual taxes based on a home’s taxable value and the tax rates set by local taxing units, such as counties, cities, school districts and special districts. State law governs how property tax in Texas works, but local appraisal districts handle tax assessment and local taxing entities set their own rates. After a home is appraised, the applicable county taxes and local rates are applied to calculate the total tax bill

This tax rate is determined by the needs and yearly budget of your local government, including counties, cities, townships, school districts and special districts. A state tax is also levied if your state has a state-level property tax. These taxes are used to cover the expenses of local services such as:

• Public transportation
• Parks and recreation
• Public schools
• Libraries
• Emergency services
• Street landscaping and lighting

Special circumstances within your city or district might levy additional property tax payments. For example, direct assessments or bonds are flat fees property owners are required to pay following a city or district-wide vote to fund local services not covered or not covered in full by property tax revenues.

And special assessments are often set up to establish long-term funding for municipal services such as parks, emergency services and schools that experience a strain on their resources due to an influx of people caused by the development of a new sub-division.

How Property Taxes Are Assessed

Tax assessments are conducted with varying frequency depending on the area you reside in, and follow procedures set by state laws and regulations.

Common factors that affect tax assessment

• Recent comparable home sales in the surrounding area
• Changes to the home, such as additions or major upgrades
• Property record details, including size, features and land value

The assessor generally groups a community’s properties together based on similar characteristics and analyzes comparable sales of the properties to determine an average sales price for each group. Those individual characteristics of your home are still considered, however, which is why it is important to remember that just because you paid the same price for your home or have the same square footage as a friend or family member does not mean your assessed value will be the same—other factors like geographical location matter.

How to Lower Property Taxes Through Exemptions and Appeals

While homeowners cannot challenge their local property tax rate, they can appeal the appraised value of their home. Characteristics like incorrect square footage and renovation plans that did not pan out can skew an assessment; however, it is recommended that homeowners first obtain the assessment documents on their property and look them over. Your local assessor’s office will have more information on the appeals process. Homeowners should also understand that often fees are required.

How to Find Property Taxes on a Home

If you are a future homeowner and you would like to learn more about the property taxes in an area, there are a couple research avenues you can explore. Property tax calculators like this one use the assessment value of your home to calculate a predicted property tax for your home.

They also show you local, state and national property tax comparisons. These can be great for new homeowners or potential homeowners who know the previously assessed value of their dream house. For a broader budgeting strategy, read these first-time homebuyer tips for planning and saving to better prepare for recurring costs like property taxes and homeowners insurance.

One of the best ways to determine property taxes in a given area, though, is to research the area’s property tax records via the county appraisal district’s records. Tax records for districts and cities within the county should be available online to potential homeowners looking to gauge the cost of owning a home in a specific area. If you want to better understand the paperwork that comes later in the process, this guide on what to expect when closing on a house explains how final costs are reviewed before closing day.

Property taxes in Texas

Property taxes in Texas are an important part of the cost of homeownership, and they are often higher than many buyers expect. Texas does not charge a state property tax, but local taxing units such as counties, cities, school districts and special districts fund services through local property taxes. Current Tax Foundation data shows Texas has a 1.36% effective property tax rate on owner-occupied housing value, which is one reason buyers should review local tax rates carefully before purchasing a home.

Every county in Texas has an appraisal district responsible for tax assessment and property value administration. In Texas, taxable property is generally appraised at market value as of January 1 each year. That means market conditions, ownership on January 1 and any applicable exemptions can all affect what a homeowner owes.

Texas homeowners should also understand that appraised value, taxable value and tax bill are not the same thing. Your appraised value reflects the district’s estimate of market value. Your taxable value is what remains after exemptions are applied. Your final property tax bill depends on that taxable value and the rates adopted by each local taxing unit.

Homebuyers comparing overall costs may also want to review these common home buyer questions before making a decision.

Ready to continue your home search? Browse new homes from Perry Homes, explore move-in-ready homes, or contact Perry Homes to speak with a team member about available communities and next steps.