What is a MUD Tax?

Real Estate Agent with Keller Williams The Woodlands

Lately I’ve had several clients relocating into The Woodlands, and they all ask what a MUD Tax is?

A Municipal Utility District (MUD) is a special purpose governmental entity of the State of Texas. Regulated by the Texas Commission on Environmental Quality (TCEQ), the MUD’s primary function is to provide water, wastewater and in some cases, drainage services within its boundaries. A MUD may sell bonds, levy and collect taxes, provide and charge for water and sewer services, build infrastructure, condemn property, enforce restrictive covenants and make regulations to accomplish its purposes.

How do they work?

All Municipal Utility Districts are managed by an elected Board of Directors. Each Director on the Board is a resident or a property owner within the boundaries of the District. The Board of Directors conducts a meeting, usually every month to transact the business of the District. These meetings are open to the public and you are welcome to attend the meetings of your District.

How will I be taxed?

 MUD tax rates vary according to property values and debt requirements.  MUD rates generally decline as the MUD area is built out.  There is a large difference in MUD rates within The Woodlands They can range from .10 per 100/ house value and as high as $1.15 per 100 /house value.  Typically the newer areas will have a higher MUD tax as they have not had the time to build out.  As the area gets more established the tax starts coming down.  I have come to the conclusion that having a little higher MUD tax is part of the cost associated with being in a newer area. 

Do I have to pay a MUD Tax?

 You could buy out in the country and be on your own well and septic.  Another option is to  buy in a country subdivision that has community water and then have your own septic.  However, then you have to deal with well and septic issues.  Sometimes community water fees are higher than the water charge in a MUD but there is no MUD tax with this option.  The other option is to buy in town but then you have an extra city tax. 

No matter how you look at it you will have to pay someone for the water. 

 For more information on MUD Districts go to:http://wjpa.org/ 

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Comments (1)

Adrian Willanger
206 909-7536 AdrianWillanger-broker.com - Seattle, WA
Profit from my two decades of experience

Hi Tina-this is a something that buyers certainly have to be aware of when looking at property in developing areas. Good stuff. 

May 10, 2013 08:05 AM