Understanding Property Taxes in Texas
Property taxes are a major financial responsibility for homeowners in Texas, and they’re only getting more complex. Texas ranks among the states with the highest property tax burdens in the country. In fact, the average effective property tax rate in Texas is 1.60%, placing it sixth highest nationwide, according to Rocket Mortgage. On average, Texas homeowners pay over $4,000 annually in property taxes, a number that can fluctuate drastically depending on your county and whether you’ve filed for exemptions.
Why are Texas property taxes so high? One major reason: the state doesn’t have a personal income tax. That leaves local governments relying heavily on property taxes to fund public schools, emergency services, road maintenance, and other community resources. According to the Tax Foundation, Texas homeowners pay a larger share of their income toward property taxes than most Americans.
And it’s not just the high dollar amount that causes stress—it’s the complexity. Many homeowners don’t understand how their tax bill is calculated, whether their valuation is accurate, or what they can do to reduce it.
This guide aims to fix that. Whether you’re a first-time homeowner or a seasoned property investor, you’ll walk away with clarity on how Texas property taxes work, what exemptions are available, how to protest your home’s value, and why companies like Home Tax Shield exist to help Texas homeowners pay only what is fair.
How Property Taxes Work and Are Collected in Texas
If you own property in Texas, property taxes are an unavoidable part of your financial picture. But understanding how they’re calculated—and how they’re ultimately collected—can help you make smarter decisions. Texas doesn’t have a personal income tax, so property taxes are the main way local governments fund public schools, emergency services, infrastructure, and community resources.
Each property tax bill is made up of multiple moving parts. Appraisal districts estimate your home’s market value, local taxing entities set the tax rate, and exemptions reduce the taxable portion of your value. These layers come together in a single formula that dictates how much you owe each year.
Your annual property tax bill is based on three things:
- Your property’s market value (determined by the county appraisal district)
- Your local tax rate (set by city, county, school districts, and other taxing entities)
- Exemptions you qualify for (like the homestead exemption)
Let’s unpack each of those and then walk through how your county tax office collects the final amount.
Property’s Market Value
This is the estimated price your home would sell for under normal conditions on the open market as of January 1 of the tax year. The county appraisal district determines this using recent sales, neighborhood trends, and characteristics of your property. This value sets the foundation for your property tax bill.
Local Tax Rate
Your tax rate is the combined percentage set by multiple taxing authorities—your school district, city, county, and other special districts like utilities or hospitals. Each entity sets its own rate annually, and those rates are applied to your taxable value. While you can’t protest the rate itself, you can vote on tax rate increases if they exceed state thresholds.
Exemptions
These are reductions to your taxable value that help lower the amount of property taxes you owe. The most common is the general homestead exemption, but there are also exemptions for seniors, people with disabilities, veterans, and surviving spouses. Each exemption you qualify for directly lowers the portion of your property’s value that is taxed.
Once the county appraisal district finalizes your property’s value and exemptions are applied, that data is passed to your local tax assessor. The tax assessor calculates your total bill using the current tax rates and sends you a property tax statement in the fall, typically around October. You must pay this bill by January 31st of the following year to avoid penalties or interest. Payments are made directly to the county tax office, not the appraisal district, so make sure you know where and how to pay on time.
How to Pay Your Property Taxes in Texas
Paying your property taxes in Texas is straightforward once you know the steps—and the key dates to mark on your calendar. After receiving your property tax bill in the fall, you typically have until January 31 of the following year to pay without penalty. Missing this deadline can result in interest and penalties that grow monthly.
Some counties offer installment payment plans or split-payment options, especially for homeowners over 65 or disabled. Check with your local county tax office to see what’s available.
What Is Escrow and How Does It Work with Property Taxes?
An escrow account is a financial arrangement set up by your mortgage lender to hold funds for certain home-related expenses, primarily property taxes and homeowners’ insurance. Each month, a portion of your mortgage payment goes into this account, so when your annual property tax bill is due, the lender pays it on your behalf from the escrowed funds. This system is designed to simplify your financial planning and ensure taxes are paid on time, but it also requires some oversight to avoid surprises.
If you have a mortgage on your home, chances are your lender collects money for property taxes each month through an escrow account. This setup ensures that when your tax bill comes due, the lender has enough set aside to pay it on your behalf. While this system is convenient, it’s not foolproof, and homeowners should understand how it works.
- Estimated Contributions: Your lender estimates your annual property taxes and divides that number into 12 monthly installments. These are included in your total monthly mortgage payment.
- Annual Escrow Analysis: Once a year, your lender reviews your escrow account to check if there’s a shortage or surplus. If taxes increase and the account is short, your monthly payment could go up or you may need to make a one-time adjustment.
- Homeowner Oversight is Still Important: Even though your lender pays the bill, you’re still responsible for ensuring it gets paid. Monitor your escrow account, read your annual statements, and confirm that payment was made by January 31 to avoid penalties.
- Escrow and New Homeowners: The first year in a home can be unpredictable. Because your lender is often estimating taxes based on outdated values or incorrect assumptions, escrow may be underfunded. That’s why first-year homeowners may face a supplemental tax bill or an escrow shortage adjustment in year two.
Understanding how escrow works can help you avoid surprises and give you more control over your property tax responsibilities.
What to Expect Your First Year Owning a Home
Buying a home is exciting, but the first year of homeownership comes with a steep learning curve, especially when it comes to property taxes. Many new homeowners assume the property taxes discussed at closing are set in stone. In reality, they can change—and often do.
Here’s what you can expect:
Your appraisal value may change.
The appraisal district values properties as of January 1. If your closing occurred later in the year, the previous owner’s exemptions and valuations may no longer apply. Your property could be reappraised the following year at a higher amount, especially if it sold for more than its last appraised value.
You may not see exemptions automatically applied.
The seller’s homestead exemption typically does not carry over. You’ll need to file your own homestead exemption to receive the benefit going forward.
Your mortgage escrow may be underfunded.
Lenders estimate property taxes based on past values, and if your home is reappraised at a higher value, you might receive a supplemental bill or escrow shortage in year two.
You’ll start receiving notices.
In the spring after purchase, expect to receive a Notice of Appraised Value. This is your opportunity to review—and possibly protest—your home’s assessed market value.
Understanding these changes ahead of time can help you avoid surprises, plan for next year’s costs, and ensure you take full advantage of the exemptions available to you.
What First-Time Homeowners Should Know About Property Taxes
If this is your first year owning a home in Texas, you may be surprised by how different your tax bill looks from what your mortgage lender estimated. That’s because property taxes often aren’t fully settled at closing, and lenders make educated guesses when funding escrow accounts.
Here are a few tips for navigating property taxes as a first-time homeowner:
- Expect a supplemental bill: If the seller claimed exemptions that no longer apply to you, or if the home was undervalued in previous years, you might receive a higher-than-expected tax bill.
- Escrow ≠ Final Bill: Even if you pay into escrow monthly, you’re still responsible for ensuring the lender pays the full amount by the deadline. Always verify that your property taxes were paid.
- Check your exemptions: After closing, file for your homestead exemption and update your ID to reflect your new address—this is often overlooked and can delay your eligibility.
- Monitor your escrow in year two: If your appraisal rises significantly, your mortgage lender may increase your monthly escrow contributions or require a catch-up payment.
Property Tax Terminology: Appraised vs. Assessed vs. Market Value
Before diving deeper into the components of your property tax bill, it’s important to understand the different terms used in the process, especially since they’re often confused or used interchangeably.
- Fair Market Value refers to the price your home would likely sell for in the current market. It’s an estimate based on recent sales of similar homes in your area and is the baseline figure used to calculate taxes.
- Appraised Value is the value assigned to your property by the county appraisal district. It’s intended to reflect fair market value but is determined using mass appraisal methods. This is the value you’ll see on your Notice of Appraised Value each year.
- Assessed Value (also called taxable value) is the number your taxes are actually calculated from. It’s your appraised value minus any exemptions you qualify for. This is the final figure multiplied by your tax rate to determine your total property tax bill.
These are just a few of the many property values, making understanding property taxes challenging.
Digging Deeper into Market Value
Each year, the county appraisal district (CAD) estimates your property’s market value—what your home would likely sell for in today’s market. This number becomes the basis for your property tax bill unless you protest it.
CADs use mass appraisal models to assess values, factoring in property characteristics, size, location, age, and recent comparable sales. But because it’s based on averages and algorithms, it can be wrong, sometimes way off. That’s why thousands of Texas homeowners protest their property value each year.
According to the Texas Comptroller, more than 460,000 Texas property owners filed a protest in a single year, and nearly 78% of them received a reduction in their appraised value, proof that valuations are frequently off the mark. (source)
If you don’t protest, you’re accepting their estimate. If you do protest and win, you can reduce your taxable base not just for this year, but for future years as well. Look at your property’s market value—what your home would likely sell for in today’s market. This number becomes the basis for your property tax bill unless you protest it.
CADs use mass appraisal models to assess values, factoring in property characteristics, size, location, age, and recent comparable sales. But because it’s based on averages and algorithms, it can be wrong, sometimes way off. That’s why thousands of Texas homeowners protest their property value each year.
Tax Rates: Who Sets Them and Can You Change Them?
Now, let’s discuss tax rates. Tax rates in Texas are set by local taxing entities (school districts, cities, counties, hospital districts, etc.) and not the state legislature. Each entity sets its rate independently, and they are applied cumulatively to your property. Your taxes will vary based on where you live, making it impossible to compare your tax bill with someone else’s who doesn’t live in your area.
Unfortunately, you can’t protest tax rates like you can market value. However, you can vote on rate increases if they exceed thresholds that trigger an election. Most taxing entities are required to get voter approval for increases beyond a certain point.
2 Ways to Lower Your Property Taxes in Texas
No one wants to overpay property taxes, especially when there are legitimate ways to lower them. Fortunately, Texas property owners have a few proven strategies to reduce their annual tax burden. While local taxing authorities set tax rates and cannot be changed individually, the other parts of your tax bill—market value and taxable value—can be influenced.
Here are two primary ways to reduce your property taxes:
- Claim All Available Exemptions
Exemptions reduce your property’s assessed value, meaning less of your home’s value is subject to taxation. The more exemptions you qualify for, the more you can save. Common examples include the homestead exemption, over-65 exemption, and disabled veteran exemptions.
- Protest Your Appraised Value
Each year, you have the legal right to challenge the appraised value set by your county. This value is the foundation of your property tax bill, and if it’s too high, you could be overpaying. Protesting can result in a lower market value, which directly reduces your taxable amount. As covered above, it’s a process that can be done on your own or by hiring professionals like Home Tax Shield.
While each of these options requires a different approach, they work together to ensure that your tax bill is based on a fair and accurate property value. Next, let’s explore how exemptions work and which ones may apply to you.
Exemptions: Your Best Friend in Reducing Your Bill
Let’s dig into exemptions, because they are one of the most powerful tools available to Texas homeowners to reduce their property tax burden. A property tax exemption reduces the portion of your home’s appraised value that is subject to taxation. For example, if your home is valued at $300,000 and you qualify for a $40,000 exemption, you’ll only be taxed on $260,000.
These exemptions don’t lower the market value of your property—they lower the assessed value, which is what taxing entities use to calculate your actual tax bill. This distinction is important because it determines how much of your property’s value is eligible to be taxed.
There are many types of exemptions in Texas, and eligibility depends on factors such as age, disability status, military service, and whether the property is your primary residence.
Common Texas property tax exemptions include:
General Homestead Exemption
This exemption applies to homeowners who use the property as their primary residence. It reduces the taxable value of your home by $40,000, meaning you only pay property taxes on the remaining amount. To qualify, you must own and occupy the home as of January 1st of the tax year. This exemption also triggers a 10% cap on annual value increases, protecting you from steep year-over-year spikes.
Over 65 or Disabled Persons Exemption
Seniors aged 65 and older, as well as homeowners with qualifying disabilities, are eligible for additional reductions on top of the general homestead exemption. This exemption can freeze school district taxes at the current level and provides an additional value reduction. It offers long-term savings, and some counties extend further reductions beyond the state-mandated minimum.
Disabled Veterans
Veterans with a service-connected disability may qualify for a partial or full exemption, depending on their VA disability rating. For example, veterans with a 100% disability rating are typically exempt from all property taxes on their primary residence. Those with lower disability ratings may receive a prorated exemption. Surviving spouses of disabled veterans may also qualify.
Surviving Spouses of Veterans or First Responders
If a veteran or first responder dies in the line of duty, their surviving spouse may be entitled to a partial or full exemption. In many cases, the spouse must remain in the home and not remarry to continue receiving the benefit. These exemptions can provide substantial, lasting relief for families navigating difficult circumstances.
Important: Exemptions don’t lower your market value; they lower what portion of that value you are taxed on. And some exemptions must be reapplied for if your deed or ownership structure changes.
What About an Agriculture Exemption?
Many property owners hear about the “ag exemption” and assume it’s a simple way to reduce their taxes. But it’s important to clarify: an agricultural exemption isn’t technically an exemption in the same sense as a homestead or over-65 exemption. It’s actually a special valuation method that allows eligible land to be appraised based on its agricultural productivity rather than its market value.
To qualify, land must be primarily used for agricultural purposes, such as farming, ranching, or wildlife management, and meet very specific acreage, usage, and historical criteria. The rules are strict and vary by county. If granted, the land’s value for taxation purposes may be dramatically reduced, but it also comes with significant responsibilities and ongoing documentation.
It’s not intended for homeowners with a backyard garden or a few chickens. Applying for and maintaining an ag valuation requires careful compliance and ongoing use verification. If the use changes or requirements aren’t met, the exemption can be removed—and rollback taxes applied for prior years.
If you believe your land may qualify, contact your county appraisal district to learn more about the qualifications, deadlines, and documentation required.
Understanding the Homestead Cap Value
One often-overlooked benefit of the general homestead exemption is the 10% homestead cap value. Once your homestead exemption is in place, your home’s assessed value (not market value) can’t increase by more than 10% in a single year, regardless of how much your property’s market value rises. This protects homeowners from dramatic year-over-year tax hikes driven by surging market conditions.
It’s important to note that this cap only applies to the assessed value used to calculate your taxes, not the appraised market value reported by the county. If your home was appraised at $400,000 last year and jumps to $475,000 this year, but your assessed value last year was $350,000, the new assessed value (after exemptions) would be capped at $385,000—10% more.
This cap applies only to the portion of your property that qualifies as your primary residence, and only after the exemption has been on file for at least one year. For newly filed homestead exemptions, the cap takes effect the following tax year.
How to File for Exemptions in Texas
To claim an exemption, you must file an application with your county’s appraisal district. Most forms are available online through your local CAD’s website. Here’s how to get started:
- Visit your local CAD website and locate the exemption forms (often listed under “Forms” or “Homestead Exemption”).
- Complete the form accurately, including proof of residency (such as a driver’s license that matches your property address).
- Submit the form and documentation either online, by mail, or in person, depending on your county’s requirements.
- File as soon as possible—while there’s no longer a hard deadline, filing early ensures your exemption is applied to the current year’s tax cycle.
If your ownership status changes (such as after refinancing, marriage, divorce, or transferring to a trust or LLC), be sure to reapply to maintain your exemption status.
— of your home. That means even if your market value is high, your taxable value (used to calculate your tax bill) can be much lower.
What Does It Mean to Protest Property Taxes?
When you protest your property taxes in Texas, you’re formally challenging the county’s determination of your home’s market value. The protest is not about contesting your tax rate—those are set by local entities and cannot be appealed. Instead, you’re telling the county appraisal district that you believe your property has been overvalued and, as a result, you’re being overtaxed.
This process gives homeowners the right to request a lower valuation based on real market data or unique conditions that affect the home’s value. That could include anything from structural issues and location factors to recent comparable sales showing lower prices. If successful, the reduced market value directly lowers your taxable amount, which reduces the final tax bill. And since Texas reappraises property values every year, this is a right homeowners can and should exercise annually.
Protesting Your Property Taxes: What’s Involved
Most homeowners don’t protest their taxes, even though the majority who do receive some reduction. The protest process ensures that your market value is accurate and fair, but doing it yourself can be overwhelming.
Here’s what it looks like to protest your property tax bill on your own:
- File a Formal Protest: Within 30 days of receiving your Notice of Appraised Value (typically sent in April), you must submit Form 50-132 to your county appraisal district. Miss this window, and you lose your chance to protest until the following year.
- Gather Evidence: Collect property photos, contractor repair estimates, home inspection reports, and MLS data showing recent comparable home sales. You’ll also need to create both a sales argument (based on recent sales) and an equity argument (based on comparable values of nearby properties).
- Prepare Documentation: Organize your evidence into a structured, persuasive case. This includes adjusting all comparables to account for differences like square footage, age, features, or property condition.
- Attend the Informal Meeting: If the appraisal district allows, you’ll meet with an appraiser to negotiate. This is your first opportunity to present your case and possibly reach a resolution without a formal hearing.
- Present at a Formal ARB Hearing: If no agreement is reached, you’ll need to appear before the Appraisal Review Board. This hearing involves presenting your case under time constraints, responding to counterarguments, and answering board questions. It can be nerve-wracking, especially without experience.
- Follow Up or Appeal: If you disagree with the ARB’s decision, your only remaining option is to appeal through binding arbitration or district court—both of which require additional time, costs, and legal familiarity.
The DIY protest process can take several hours spread across weeks or even months, and success is far from guaranteed without expert preparation.
Hiring a Property Tax Protest Company
For many homeowners, the complexities and time demands of self-filing make professional help a smart investment. Hiring a property tax protest company means you can offload the research, paperwork, and hearings to experts who know how the system works.
These companies typically specialize in understanding local appraisal district procedures, adjusting comparable properties accurately, and building strong equity and sales arguments. Some charge only if they win you a reduction, while others may have upfront or flat-rate pricing. Either way, the value lies in saving time, avoiding stress, and increasing the likelihood of getting a fair result.
When comparing property tax protest companies, look for the following:
- Quick Online Signup: The signup should take only a few minutes for you to provide basic property information and authorize them to handle your protest.
- Expert Case Review: Every property should be reviewed individually by an experienced local professional—no automation, no shortcuts.
- Comprehensive Preparation: Your representative should prepare both sales and equity cases using high-quality data and real-time market intelligence.
- Representation at Hearings: Their professionals must attend hearings on your behalf, handling all correspondence and negotiations with the appraisal district.
- Clear, Upfront Pricing: A low flat upfront fee will guarantee your case gets worked, unlike firms that charge nothing to lure you in but only act if a reduction looks easy and profitable.
With your chosen partner, you should avoid the time sink, paperwork, and stress, while maximizing your chances of a fair outcome. It’s the smart way to protect your home’s value and your wallet.
Home Tax Shield, for instance, is different, more transparent, more in it for you. Here’s how:
A professional reviews every property individually
Unlike mass protest firms that rely on automation or untrained reps, Home Tax Shield assigns experienced local professionals to evaluate every property. We don’t take a one-size-fits-all approach. Your case is built using real data, human judgment, and years of tax protest expertise, ensuring it’s tailored to your unique situation and more likely to succeed.
We don’t overpromise savings
Many companies lure homeowners with bold guarantees of massive tax reductions, then deliver nothing. Home Tax Shield doesn’t play that game. Our promise is simple and honest: if there’s a fair reduction to be had, we’ll find it. If there isn’t, we’ll tell you, backed by data and experience. It’s about accuracy, not hype.
We go to hearings on your behalf
Showing up at the Appraisal Review Board can be stressful and time-consuming. With Home Tax Shield, you don’t have to take time off work or prepare to face the county alone. Our professionals attend all hearings, negotiate with appraisers, and advocate for your case using prepared evidence and proven arguments.
We charge a flat upfront fee, ensuring every case gets worked
Some protest firms only pursue cases they think are easy wins, because they only get paid if you save. That means many homeowners are ignored or underserved. Home Tax Shield charges a modest upfront fee, which commits us to work every case fully. Whether your reduction is likely or not, we’ll go through the entire process to ensure fairness and transparency in your valuation.
Why You Should Protest Your Property Taxes Every Year
Even if you received a fair valuation this year, there’s no guarantee that next year’s will be accurate. Property values in Texas are reassessed annually, and due to market fluctuations and mass appraisal techniques, overvaluation is increasingly common. By protesting every year, you not only guard against being overtaxed but also help set a lower baseline that future appraisals will build upon. This compounding effect can result in significant long-term savings.
But remembering to file, gathering documentation, and navigating deadlines every single year? That’s a lot to put on your calendar.
Home Tax Shield Protests Automatically—So You Don’t Have To
Once you sign up with Home Tax Shield, your property is automatically reviewed and protested every single year, without you needing to re-enroll or remember any deadlines. It’s a set-it-and-forget-it service that ensures you never miss a chance to reduce your taxes. Whether your valuation rises a little or a lot, Home Tax Shield is already on it. That peace of mind is what keeps thousands of Texas homeowners coming back year after year.
Frequently Asked Questions
Does every homeowner have to pay property taxes? Yes. All Texas property owners are responsible for property taxes unless they qualify for an exemption that eliminates them (e.g., 100% disabled veterans).
How much do first-time homeowners get back in taxes? Property taxes are not refunded, but first-time homeowners may qualify for deductions on their federal income tax or benefit from homestead exemptions that lower future tax bills.
What year do you claim property taxes? You claim the property taxes you paid during the tax year on your federal return, typically filed the following April.
What is the homestead property exemption in Texas? It reduces your home’s taxable value by $40,000. You must own and occupy the home as your primary residence.
What is the property tax exemption for over 65 in Texas? Homeowners over 65 receive additional exemptions, including school tax freezes and an extra deduction beyond the general homestead exemption.
Is it worth protesting property taxes? Yes. Even small reductions save you money year after year. The majority of successful protests result in a 3-5% decrease.
How do I calculate my property taxes in Texas? Use the formula: (Market Value – Exemptions) x Tax Rate = Estimated Tax Bill
Are property taxes based on purchase price in Texas? No. Your taxes are based on current market value, not what you paid.
How much property tax do you pay in Texas? It varies. Texas has some of the highest effective property tax rates in the country, often ranging between 1.6% to 2.4% of your property’s market value.
Are property taxes based on purchase price in Texas? This is a common misconception. Taxes are based on your current appraised value, not your original purchase price.
Stop Overpaying on Property Taxes in Texas: Take the Next Step
Navigating Texas property taxes doesn’t have to be confusing, frustrating, or expensive. The more you understand how property taxes work—how your market value is determined, how tax rates are applied, and how exemptions and protests can reduce your bill—the more empowered you are as a homeowner.
Here are the key takeaways:
- Your property taxes are based on your market value, exemptions, and local tax rates.
- You can’t change your tax rate, but you can protest your valuation and claim exemptions to reduce what you owe.
- Filing a protest on your own takes time, effort, and research, and even then, success isn’t guaranteed.
- Home Tax Shield simplifies the process by handling the protest for you with experienced professionals, transparent pricing, and personalized service.
If you’ve ever felt unsure about whether your tax bill is fair, or if you’ve simply been too busy to deal with it, this is your moment to act. Homeowners across Texas are saving money and gaining confidence by partnering with trusted property tax experts.
Don’t wait. Sign up with Home Tax Shield today and let their team go to work for you. It takes just minutes to get started and is the first step in making sure you’re not paying a penny more than you should. Let experienced professionals review your valuation, protest your appraisal, and give you peace of mind year after year. Visit hometaxshield.com to get started.