Understanding Texas Property Taxes and Their Impact on Your Mortgage
Texas is well known for having no state income tax, but that tax advantage is significantly offset by property taxes that rank among the highest in the nation. The average effective property tax rate in Texas is approximately 1.6–1.8% of a home's assessed value, compared to a national average of around 1%. For a $400,000 home, that translates to $6,400–$7,200 per year in property taxes. Understanding how Texas property taxes work — and how they factor into your mortgage payments — is essential for accurate homeownership budgeting.
How Texas Property Taxes Are Assessed
Texas counties assess property taxes annually based on the appraised value of your home as determined by the county appraisal district. Each county has its own appraisal district that sets values, and multiple taxing entities — county, city, school district, special districts — each apply their own tax rate to that appraised value. Your total tax bill is the sum of all these levies. Texas law limits the year-over-year increase in appraised value for properties with a homestead exemption to 10% annually, providing some protection against rapid market appreciation translating immediately into higher tax bills.
Homestead Exemptions and Property Tax Relief
Texas offers several exemptions that reduce your taxable home value. The general homestead exemption removes $100,000 from your home's appraised value for school district taxes as of 2023. Homeowners aged 65 or older or disabled individuals receive an additional $10,000 school district exemption and a freeze on school district taxes. Veterans with VA-rated disabilities may qualify for partial or total exemptions depending on their disability rating. Applying for all exemptions you qualify for at your county appraisal district can meaningfully reduce your annual tax burden — and you must apply proactively; they are not applied automatically.
Escrow Accounts and Your Monthly Mortgage Payment
Most Texas mortgage lenders require an escrow account to collect property tax and homeowners insurance payments alongside your principal and interest. Your lender divides your estimated annual property tax and insurance costs by twelve and adds those amounts to your monthly mortgage payment. They hold these funds in escrow and pay the bills on your behalf when they come due. Because Texas property taxes are paid in arrears and due by January 31 for the preceding year, your escrow account needs to be adequately funded by year-end. Lenders conduct annual escrow analyses and may increase your monthly payment if taxes or insurance costs rise significantly.
Protesting Your Appraisal to Reduce Your Tax Bill
Texas homeowners have the right to protest their property's appraised value annually if they believe it is excessive. File a protest with your county appraisal review board by the May 15 deadline. Gather supporting evidence: recent comparable sales of similar nearby homes that sold for less than your appraised value, photos documenting condition issues, or an independent appraisal. Many homeowners who protest receive reductions. Property tax consulting firms also offer to handle protests on a contingency basis, taking a percentage of the first year's savings — a low-risk option for homeowners who prefer professional representation.
Conclusion
Texas property taxes are a significant and ongoing cost of homeownership, but informed homeowners can manage this burden through exemptions, timely protests, and accurate escrow management. Factor property taxes carefully into your homebuying budget to avoid surprises after closing. Return to homepage or contact us to get a full picture of your Texas mortgage costs.