How Texas Property Taxes Work
Texas funds schools, cities, counties, and special districts almost entirely through property taxes (since there's no state income tax). That means the tax rates here are higher than most other states — but understanding the system helps you plan ahead.
The Big Picture
The average effective property tax rate in Texas is approximately 1.60% to 1.80% of your home's appraised value. On a $350,000 home, that's roughly $5,600 to $6,300 per year — or about $467 to $525 per month added to your housing costs.
The Two-Part System
Your property tax bill is determined by two things working together:
1. Appraised Value
Your county appraisal district (CAD) determines what your home is worth each year. In DFW, that's typically the Dallas Central Appraisal District (DCAD) or Tarrant Appraisal District (TAD), depending on which county you're in.
This is not the same as your purchase price — it's the county's independent estimate of market value, updated every January 1st.
2. Tax Rate
Multiple taxing entities set their own rates, and they all add up. Your total rate is the combination of your school district + city + county + any special districts. This combined rate typically ranges from about 1.8% to 2.7% across DFW before exemptions are applied.
The Formula
Annual Property Tax = (Appraised Value − Exemptions) × Combined Tax Rate
Example: A home appraised at $350,000 with a $100,000 homestead exemption and a combined rate of 2.2% would owe: ($350,000 − $100,000) × 0.022 = $5,500 per year.
Who's Taxing You? The Entities That Add Up
One of the most confusing things about Texas property taxes is that you don't just pay one tax — you pay several, all on the same bill. Here's who typically collects:
🏫 School District
Usually the largest portion of your bill — often 40-55% of your total taxes. School districts set their own rates and voters can approve bond elections that increase them. This is also where the homestead exemption has the biggest impact.
🏛️ County
Pays for county roads, sheriff, courts, parks, and county services. County taxes typically make up about 15-25% of your total bill.
🏙️ City
Funds police, fire, streets, utilities, and municipal services. City taxes are usually 15-25% of your total. Note: If you live in an unincorporated area, you may not pay city taxes — but you also won't have city services.
💧 Special Districts
MUDs (Municipal Utility Districts), PIDs (Public Improvement Districts), and other special districts can add 0.25% to 1.0%+ to your rate. These are common in newer DFW subdivisions and are often the hidden surprise buyers don't expect.
What DFW Homebuyers Actually Pay
Tax rates vary significantly across the DFW metroplex. Here's a general picture of what you can expect. Keep in mind these are approximate combined rates and can change each year:
DFW Alert: MUD & PID Taxes in New Developments
Many of the newest, most attractive neighborhoods in DFW suburbs (especially in Celina, Princeton, Melissa, Forney, and other fast-growing areas) are in Municipal Utility Districts or Public Improvement Districts. These add an extra tax or assessment on top of regular property taxes to pay for water, sewer, roads, and other infrastructure the developer built.
Always ask: "Is this property in a MUD, PID, or any special taxing district?" before making an offer. The builder or your agent should be able to tell you.
What This Looks Like Monthly
Here's a simple comparison to show how location affects your monthly tax cost on the same $350,000 home (before homestead exemption):
Lower-Tax Area (~2.0%)
- Annual taxes: ~$7,000
- Monthly tax cost: ~$583
- Examples: Parts of Denton, some unincorporated areas
Higher-Tax Area (~2.7% with MUD)
- Annual taxes: ~$9,450
- Monthly tax cost: ~$788
- Examples: Some newer subdivisions in Collin/Denton County with MUD
That's a difference of over $200 per month — or nearly $2,500 per year — on the exact same priced home. Location matters enormously for taxes in DFW.
The Homestead Exemption: Your Biggest Tax Break
The homestead exemption is the single most important property tax benefit in Texas. If you live in the home you own as your primary residence, you qualify — and it can save you thousands of dollars every year.
What the Homestead Exemption Does
$100,000 School Tax Exemption
Texas law requires every school district to exempt $100,000 from your home's appraised value for school taxes. Since school taxes are the biggest portion of your bill, this saves most homeowners between $1,000 and $1,400 per year.
10% Appraisal Cap
Once you have a homestead exemption, your appraised value (for tax purposes) cannot increase by more than 10% per year, no matter how much the market goes up. In a hot DFW market where values jump 15-20%, this cap saves you real money.
Additional Local Exemptions
Many cities and counties offer their own homestead exemptions on top of the state one — either a flat dollar amount or a percentage. Check with your specific city and county for their exemptions.
Extra for Seniors & Disabled
If you're 65+ or disabled, you qualify for an additional $10,000 school tax exemption, plus a tax ceiling — your school taxes are frozen and can never increase (unless you add improvements to the home).
How to File Your Homestead Exemption
Buy and Move Into Your Home
You must own the property and use it as your primary residence as of January 1st of the tax year you're filing for. You can file the same year you purchase.
Get the Application
Download Form 50-114 from the Texas Comptroller's website, or get it from your county appraisal district. In DFW, that's DCAD (Dallas County), TAD (Tarrant County), Collin CAD, Denton CAD, etc.
Submit Before April 30th
File by April 30th for that tax year. You'll need your driver's license (showing the property address) and may need a copy of your deed. Many DFW counties now allow online filing.
One-Time Filing
Good news — you only have to file once. The exemption stays in place automatically each year as long as you still live in the home. If you move, you'll need to file again for your new property.
Don't Forget!
This is free money that many new homeowners miss. There's no fee to file, and it can save you $1,000 to $2,000+ per year. Set a reminder to file as soon as you close on your home. You can even file late (up to 2 years after the deadline) and still receive the exemption for that year.
How to Protest Your Property Tax Appraisal
Every year, your county appraisal district sends you a "Notice of Appraised Value" — usually in April or May. If you think they overvalued your home, you have the right to protest. And in DFW's sometimes volatile market, it's often worth doing.
The Protest Process
Review Your Notice
When you receive your appraisal notice (usually in April–May), compare the appraised value to what you think your home is actually worth. Check the details — square footage, bedroom count, condition — for errors.
File Your Protest by May 15th (or 30 Days After Notice)
Submit a protest online or by mail. You can protest the market value, unequal appraisal (your home taxed higher than comparable properties), or errors in the appraisal record. You don't need a specific reason — "value is too high" is enough.
Gather Your Evidence
Collect comparable sales (homes similar to yours that sold for less), photos of any issues that reduce value (needed repairs, busy road, power lines), and any errors in the appraisal district's records. The appraisal district websites usually have sales data you can use.
Informal Hearing First
Most DFW appraisal districts offer an informal meeting with an appraiser before your formal hearing. Many protests are settled here — the appraiser may agree to reduce your value based on your evidence. This is often a phone call or brief in-person meeting.
Formal ARB Hearing (If Needed)
If the informal settlement isn't enough, your case goes to the Appraisal Review Board (ARB). You present your evidence to a panel, and they decide. You can attend in person, by phone, or submit written evidence in most DFW counties.
✅ DIY Protest (Do It Yourself)
- Free — no cost to file or attend hearings
- Good if you have clear comparable sales
- You learn the process for future years
- Best for: straightforward cases with obvious overvaluation
📋 Hire a Protest Company
- They handle everything for you
- Typically charge 30-40% of your tax savings
- Only pay if they save you money
- Best for: busy homeowners or complex situations
Worth Knowing
In DFW, protesting is extremely common — some estimates suggest over half of all homeowners who protest get a reduction. The process is free and there's no penalty for trying. Even a small reduction of $20,000 in appraised value can save you $400-$500 per year.
MUDs and PIDs: The Hidden Tax in New Neighborhoods
If you're looking at newer construction in DFW suburbs — particularly in the fast-growing northern and eastern corridors — there's a good chance the neighborhood is in a MUD or PID. Here's what that means for your wallet.
MUD — Municipal Utility District
A MUD is a special district created to finance water, sewer, drainage, and road infrastructure for new developments. The developer creates the MUD, builds the infrastructure with bonds, and homeowners repay those bonds through an additional property tax.
Typical DFW MUD rate: 0.50% to 1.00%+ added to your normal tax rate. MUD rates can decrease over time as bonds are paid off, but this takes decades.
PID — Public Improvement District
A PID is similar but works through annual assessments rather than tax rates. PIDs fund things like landscaping, trails, parks, and other community amenities. The assessment shows up as a separate line item on your tax bill.
Typical DFW PID assessment: $1,000 to $3,000+ per year, depending on the community. Unlike MUDs, PIDs can be harder to track because they're not always reflected in the listed tax rate.
Questions to Ask Before Buying in a MUD or PID
Important for Budgeting
When a builder tells you the "tax rate" for a new home, ask specifically whether that includes MUD and PID assessments. Sometimes the quoted rate doesn't include these, and you could be looking at $200-$400+ more per month than you expected. Always get the total effective rate in writing.
Budgeting for Property Taxes in Your Monthly Payment
Most homebuyers pay property taxes through their mortgage payment — your lender collects a monthly amount and holds it in an escrow account, then pays the tax bill when it's due. Here's how to make sure you're prepared.
How Escrow Works
Lender Estimates Annual Taxes
When you close, your lender estimates your annual property tax bill based on the prior year's taxes and current rates. They divide that by 12 and add it to your monthly mortgage payment.
Monthly Collection
Each month, part of your payment goes to principal and interest (P&I) and part goes into your escrow account for taxes and insurance. Your mortgage statement should show the breakdown.
Annual Escrow Analysis
Once a year, your lender reviews the escrow account. If taxes went up (which they often do in DFW), your monthly payment increases. If there's a shortage, you may need to make up the difference or have it spread over the next 12 months.
The First-Year Surprise
If you buy a newly built home, your first year's taxes may be based on the land value only (since the home wasn't finished when the assessment was done). When the county reassesses and includes the completed home, your tax bill — and monthly payment — can jump significantly. Budget for this increase from day one.
Quick Budget Estimator
To estimate your monthly property tax cost before you buy:
Simple Method
Home Price × Tax Rate ÷ 12 = Monthly Tax Cost
Example: $400,000 × 2.2% ÷ 12 = $733/month in property taxes
With homestead exemption (subtracting $100,000 from school portion): savings of roughly $100-$120/month, bringing it to approximately $613-$633/month.
Key Takeaways
Texas property taxes are high — typically 1.8% to 2.7% of your home's value — because there's no state income tax. Always factor taxes into your monthly budget.
File your homestead exemption immediately after closing. It's free, takes minutes, and saves $1,000 to $2,000+ per year. Don't leave this money on the table.
Protest your appraisal every year. It's free, there's no downside, and most DFW homeowners who protest get some reduction.
Always ask about MUDs and PIDs in new developments. These hidden taxes can add $200-$400+ per month and are easy to miss if you don't ask.