What Are Property Taxes Based on in Texas?

Texas property taxes come down to two numbers: your home’s taxable value and the tax rates adopted by the local governments that serve your address.

• Your county appraisal district handles the value side, starting with market value as of January 1.
• Exemptions and the homestead appraisal cap can push your taxable value well below your market value.
• School districts, counties, cities, and special districts each adopt their own rate, and your bill adds them together.
• Value and rates move separately, so your bill can rise in a year when a tax rate holds steady or drops.

Learn which office controls which number, and you will know exactly where to look when your bill changes.

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The question “what are property taxes based on?” has a short answer in Texas: the taxable value of your property and the tax rates set by the local taxing units that serve it. Multiply the two and you have the tax.

Taxable property value × applicable local tax rates = property tax amount

Texas has no state property tax. Instead, more than 4,796 local taxing units levy property taxes to pay for schools, roads, police, and fire protection. That local design is why two similar homes a few miles apart can owe very different amounts, and why making sense of your Texas property tax bill starts with knowing who controls each piece. This guide covers how property taxes work in Texas, factor by factor.

How the Texas Property Tax System Works

The Texas property tax system is run locally, and five groups each handle a different job. No single office decides your bill, so it helps to know who handles each part of what property taxes are based on. 

• County appraisal districts (CADs): Led by a chief appraiser, the CAD appraises property as of January 1 each year and processes exemption applications. It does not set tax rates or levy any tax.
• Local taxing units: School districts, counties, cities, and special districts adopt budgets and set the tax rates needed to fund them.
• Appraisal Review Boards (ARBs): Each ARB is a board of local citizens that hears disagreements between property owners and the CAD about a property’s value.
• County tax assessor-collector: Every Texas county has one. This office mails tax bills and collects payment for the county, and often for school districts, cities, and other units under a contract or local arrangement. Some taxing units collect their own taxes instead, so some homeowners receive more than one bill. The tax office sets neither values nor rates. 
• Property owners: You pay the tax, and you have the right to notice of value increases and to protest the tax appraised value the CAD sets.

These steps happen in a set order each year, from the January 1 valuation date to the bill that arrives in the fall. The Texas Property Tax Timeline walks through that sequence, and your local county can confirm exact dates.

What Determines Your Property Taxes in Texas?

What determines property taxes for a Texas home comes down to five factors: market and appraised value, taxable value, exemptions, the homestead appraisal cap, and local tax rates. The first four shape the value side of the formula, and the fifth is the rate side.

Your Property’s Market and Appraised Value

Market value is the starting point, and the first piece of what property taxes are based on. It is the price your home would sell for when buyer and seller both want the best deal and neither is under pressure, estimated by the CAD as of January 1. Appraisal districts get there through mass appraisal, using recent sales of similar homes and adjusting for differences in size, age, location, and condition. Those adjustments are why a neighbor’s value tells you very little about your own.

Appraised value is the market value after any legal limit on its growth has been applied. For most properties the two numbers match. For a homestead protected by the appraisal cap, the appraised value can sit below market value. On the Notice of Appraised Value that arrives each spring, the figure labeled “Market Value” is where the chain begins, and in protest terms it is your tax appraised value. For a deeper look, see our guide to the Appraised Value and the Market Value of Texas homes. 

Your Taxable Value

Taxable value is the number a tax rate is actually applied to. It equals your appraised value minus any exemptions. It is also not a single figure. Each taxing unit grants its own exemptions, so your taxable value can differ from one unit to the next. The school district’s number is often the lowest because the largest required exemption applies there. For a closer look at these labels, see Assessed Value vs Taxable Value.

Property Tax Exemptions

Exemptions reduce taxable value. They do not change market value. An exemption removes part of your home’s value from taxation by one or more taxing units, and the most common is the residence homestead exemption on a primary residence. State law requires school districts to provide a $140,000 homestead exemption, which applies only to school district taxes.

Voters approved that amount in November 2025, and the amendment took effect for the tax year beginning January 1, 2025, so it applies retroactively to 2025 tax bills. Homeowners who are 65 or older or disabled receive an additional $60,000 from school districts, for a combined $200,000. Cities, counties, and other units may add a local option exemption of up to 20% of the home’s value.

Other categories exist for disabled veterans and certain surviving spouses. You apply directly with your CAD, as soon as you own and occupy the home. Appraisal districts must also review each homestead exemption at least once every five tax years, so respond promptly to any verification request. Our resource, Texas Property Tax Exemptions Explained, covers each one in detail.

The Homestead Appraisal Cap

The homestead appraisal cap limits how fast a homestead’s appraised value can grow: no more than 10% above the prior year’s appraised value, plus the market value of any new improvements. It does not limit market value, which the CAD still records in full, and both figures appear on your notice. The cap takes effect on January 1 after you have lived in the home as your homestead for one full calendar year, known as the base year. Partial years don’t count, so for most buyers the cap first applies in the third calendar year of ownership. 

The cap is not a limit on your tax bill. Rates can change, and a capped value can keep climbing 10% a year until it catches up with market value. Rental properties and second homes do not receive the 10% cap. A separate 20% limit covers certain non-homestead real property, and it expires December 31, 2026. Read more in Understanding the 10% Homestead Exemption Cap.

Local Property Tax Rates

Tax rates are the second half of the formula. The governing body of each taxing unit adopts a budget and then sets a rate, shown as a percentage of taxable value, to fund it.  Most homes sit inside several units at once:

• County
• City
• School district
• Special districts, such as hospital, junior college, water, or emergency services districts

Your total rate is the sum of every unit that covers your address, which is why no single rate describes Texas as a whole. State law places guardrails on increases. Cities and counties, for example, generally need voter approval to exceed a 3.5% increase for operating expenses. Rates cannot be protested the way a value can. Your influence comes through public hearings and local elections, and your county’s Truth in Taxation website lists proposed rates and hearing dates.

Why Can Property Taxes Increase Even If the Tax Rate Doesn’t?

Your bill can go up with a flat or falling rate because the formula has two moving parts. When taxable value rises faster than a rate falls, the tax still grows.

Picture a home with a taxable value of $300,000 and a combined rate of 2%, for a tax of $6,000. The next year the rate drops to 1.95%, but the taxable value rises to $320,000. The tax is now $6,240, even though the rate went down. These figures are for illustration only.

Value growth is the usual driver. The Comptroller’s latest preliminary estimates put statewide taxable property value at $4.33 trillion in 2026, a 5.07% rise from 2025. When values climb, a taxing unit can collect more revenue without touching its rate. One unit may also lower its rate while another raises its own.

The same math can work in your favor. A jump in market value does not carry dollar for dollar into taxable value, because the homestead cap can hold back part of the increase. So when you look at what property taxes are based on, look past market value to taxable value and rates. 

Example: What Determines a Texas Property Tax Bill?

For any one home, a Texas property tax bill is built in five steps: market value, the homestead cap, exemptions, local tax rates, and the final math. So what are Texas property taxes based on for one specific home? This hypothetical homestead shows what determines the property tax amount at each step. Every figure is illustrative, and the rates are round numbers chosen for easy math, not a typical Texas rate.

1. Market value: The CAD estimates the home at $450,000 as of January 1.
2. Homestead cap: Last year’s appraised value was $380,000, so this year’s appraised value is limited to $418,000.
3. Exemptions: The $140,000 school homestead exemption brings the school taxable value to $278,000. The other units in this example offer no local exemption, so their taxable value stays at $418,000.
4. Local tax rates: The school district rate is 1%. The county, city, and a special district add up to 0.90%. 
5. Estimated tax: The school district taxes $278,000 at 1%, which is $2,780. The county, city, and special district tax $418,000 at a combined 0.90%, which is $3,762. Added together, the estimated tax is $6,542. 

Run the same rates against the full $450,000 with no cap and no exemption, and the tax would be $8,550. The gap comes entirely from the steps between market value and taxable value. For the full math, see How Texas Property Taxes Are Calculated.

Who Determines Your Property Value vs. Your Tax Rate?

The county appraisal district determines your property value, and the governing body of each local taxing unit sets your tax rate. The appraisal district does not decide how much tax you pay. The table below shows who handles each piece of how property taxes work in Texas. 

What is being decided	Who decides it
Market value and appraised value	County appraisal district (chief appraiser)
Whether an exemption is granted	County appraisal district (chief appraiser)
Disputes over a property’s value	Appraisal Review Board
Tax rates	Governing body of each taxing unit: school board, commissioners court, city council, special district board
Billing and collection	County tax assessor-collector, or the taxing unit’s own tax office

The Texas Legislature writes the rules but sets neither your value nor your local tax rate. For a question about a value on your notice, start with the CAD. For a question about a rate, start with the taxing unit that adopted it.

Can You Lower Your Property Taxes in Texas?

You may be able to, and nearly all of your options sit on the value side of the formula. Three actions matter most:

• Confirm that every exemption you qualify for is on file. This is an application handled directly with the CAD, not a protest.
• Ask the CAD to fix errors in your property record, such as incorrect square footage. Record corrections are also handled directly with the CAD rather than through a protest.
• Protest your tax appraised value every year, whether or not it looks high. A protest is the formal way to challenge that number, either as too high or as unequal compared with similar properties, and any reduction becomes the baseline for future years. Our guide on How to Protest Property Taxes explains the process.

Each of these is covered step by step in the complete guide: How to Lower Property Taxes in Texas.

FAQs About What Determines Texas Property Taxes

These quick answers recap what determines property taxes in Texas and who is responsible for each part.

Know Your Numbers, Then Make Sure They’re Fair

You now know what property taxes are based on in Texas: a value set by your appraisal district, trimmed by exemptions and the homestead cap, then multiplied by rates your local officials adopt. Rates are settled in public hearings and at the ballot box, but your tax appraised value is yours to protest every year, and licensed, local property tax professionals can handle that protest for you. A fee model that pairs a modest upfront fee with a share of any savings is the best value, because it commits a firm to a full protest on every property every year, including the harder files. Be cautious of big savings promises, because state rules bar property tax consultants from assuring a specific outcome to get your business. At Home Tax Shield, our licensed, local professionals take your property through the entire protest process each year so you know whether your tax appraised value is fair. Find your property and get started with us today.