Why Are Property Taxes So High in Texas?

Texas is widely recognized for its high property taxes, often ranking among the states with the highest effective rates. Understanding the structure of property taxation in Texas, from valuation processes to the entities that levy these taxes, helps clarify why these costs are elevated. This article explores the primary factors contributing to Texas’s elevated property tax landscape.

The Core Components of Texas Property Taxes

A property tax bill in Texas is determined by two main factors: the property’s appraised value and the combined tax rates set by local taxing entities. Appraised value, also known as market value, represents the estimated price a property would sell for on January 1 of each tax year, as determined by a county appraisal district.

The tax rate, expressed as a percentage or per $100 of appraised value, is applied to this value. This calculation yields the annual property tax amount. An increase in either the appraised value or the tax rate directly translates to a higher tax bill for property owners.

Reliance on Local Property Taxes

A primary reason for Texas’s high property taxes stems from the state’s unique tax structure, specifically the absence of a state income tax. Texas does not levy a personal income tax, meaning a substantial portion of the financial burden for essential public services falls directly on local property taxes.

Local governments, including school districts, cities, and counties, heavily depend on property tax collections to fund their operations and infrastructure projects. This reliance necessitates higher property tax rates to cover the costs of public education, law enforcement, fire protection, road maintenance, and other community services.

Understanding Property Appraisals

The county appraisal district (CAD) in each county determines property values for taxation purposes. These districts annually assess the market value of all properties within their boundaries as of January 1. The appraisal process involves evaluating recent sales data of comparable properties, considering factors such as location, size, age, condition, and amenities.

Rising property values, particularly in growing urban and suburban areas, directly contribute to increased tax bills even if tax rates remain constant. For homesteads, the Texas Property Tax Code includes an appraisal cap, limiting the annual increase in appraised value to 10% more than the previous year’s appraised value, plus any new improvements. This helps mitigate sudden increases in taxable value for qualifying primary residences.

Local Taxing Entities and Their Rates

Multiple local government entities levy property taxes on the same property in Texas. These entities include independent school districts, cities, counties, and various special districts such as hospital districts, community college districts, and emergency services districts. Each taxing unit independently sets its own tax rate annually based on its budgetary needs.

The cumulative effect of these individual tax rates contributes significantly to the overall property tax burden. A property owner’s tax bill combines the rates from their school district, city, county, and any other applicable special districts. Local units must calculate a “no-new-revenue tax rate,” which generates the same property tax revenue as the previous year on existing properties, and a “voter-approval tax rate,” representing the maximum rate generally allowed without voter approval.

Property Tax Exemptions and Limitations

Several exemptions are available to help reduce a property’s taxable value. The most common is the general residence homestead exemption, which reduces the appraised value of a primary residence for school district taxes by a state-mandated amount. Additional exemptions exist for homeowners who are age 65 or older or disabled, providing further reductions in taxable value, particularly for school district taxes.

Disabled veterans may also qualify for partial or full exemptions, depending on their disability rating and whether the property is their homestead. While these exemptions offer meaningful relief by lowering the taxable portion of a property’s value, they do not eliminate the impact of high market values or the combined rates set by multiple taxing entities.