Property Taxes in Texas - they are high but the good news is no state income tax!

By
Real Estate Agent with Results Realty

 

Texas does not have a state income tax! When people move to the Houston area from other states they are often surprised by our high property taxes.  We were in that group when we moved here 11 years ago.  What we found however is that Texas is one of seven states without an individual or corporate income tax. Most states derive about 40% of their revenue from income taxes, a third from sales tax and the rest from taxes on items such as business licenses and gasoline.  Since Texas doesn't have a state income tax they have a fairly high sales tax (in our area 7 to 8%) and high property taxes but that is offset by no state income tax. All that infrastructure has to be paid for in some way; I guess.

In Northwest Harris and Southeast Montgomery Counties there are basically three different property taxing authorities. There is a county tax; which covers such things as county, hospital, emergency services, port authority, flood control, community college etc. The second tax is a school tax. The amount of this tax will depend on which school district you live in. The amount of the school district taxes vary by district but they are very similar; they differ by pennies. It doesn't matter where you live you are going to have these two taxing authorities.

The third taxing authority is the MUD or Municipal Utility District. Basically this is your water & sewer tax. This is the taxing authority that is going to vary subdivision by subdivision. There are a few older subdivisions in the area that have paid their bonds and don't have this tax. The rate will vary from .25 to over $2.00 per 100 value of your house. If you live in a country subdivision and are on a septic you will not have this tax.  Typically the country subdivisions are on septic and have community water.

If your home is your homestead you can qualify for a homestead exemption.  This can be up to 20% of your property tax.  Each taxing entity will give you a different exemption though so you will need to check with the taxing authorities in the area you live.  To get information for Harris County taxes you can go to the Harris County Appraisal District HCAD. For Montgomery County taxes you can get information at the Montgomery County Appraisal Tax Office.

Even with the higher property tax Texas ranks fairly low in overall taxes paid among all 50 states.  I found a study where The Tax Foundation, a nonprofit fiscal policy research group, estimated the average taxpayer's total state and local tax burden for 2006 in each of the 50 states and the District of Columbia.  According to that study Texas was ranked 7 out of the nation but there are differing studies.  Texas always seems to be ranked fairly good though.

The good news is that you get a LOT of home for your money in Texas; even with the high taxes.  We have lived in two other states and for the same money a month we bought a newer home with more square footage. What a great place to live!

For all your real estate needs, contact me today!
Marchel Peterson
Results Realty
Cell: 832-721-8332

Comments (17)

Kay Perry
Kay Perry, Broker - College Station, TX
Hi Marchel, Yes taxes are what makes the payments so high.  But we can't avoid them.  Yes you are right, Texas has very affordable housing.
Feb 27, 2008 01:37 PM
Marchel Peterson
Results Realty - Spring, TX
Spring TX Real Estate E-Pro
Kay, you are right even with our high property taxes we still have affordable housing.  We were freaked out about the taxes to begin with but when we realized there was not state income tax we realized it was a wash.  Actually not even as Texas taxes were better than any of the states we moved out of and they all had state income tax.
Feb 27, 2008 02:12 PM
Lacey D. Horton
LDH Services - Heath, TX
Certified Signing Agent Texas
Marchel, this is a common complaint among borrowers when closing on their homes.  I don't know why Texas is so high either! I will agree with Kay -- at least our housing is affordable.
Feb 27, 2008 02:47 PM
Marchel Peterson
Results Realty - Spring, TX
Spring TX Real Estate E-Pro
Lacey, I guess the government is going to get their taxes one way or another.  At least we don't have state income tax.  It is good that we have reasonable home prices though.  Even with our higher property taxes the payment is still less expensive than most parts of the country.
Feb 27, 2008 02:58 PM
Donna Harris
Donna Homes, powered by JPAR - TexasRealEstateMediationServices.com - Austin, TX
Realtor,Mediator,Ombudsman,Property Tax Arbitrator
Taxes are broken down a little differently in the Dallas area as there are very few MUDs around here.  What are the actual rates down there?  Here, since rates are different per city, per county, per school, per college, the rates can range from about 1.8% up to over 3.2%.  Of course the properties that are in "county" and no city have the lower taxes.  The newer areas are typically the ones with the higher taxes as they're the ones needing to build new schools and infratructure.
Feb 28, 2008 04:18 AM
Marchel Peterson
Results Realty - Spring, TX
Spring TX Real Estate E-Pro

Donna, your area has a less expensive tax rate than ours; although it sounds like they are structured simiar by county, school, college, MUD or city, etc. We don't have many cities so have lots of MUDS. 

About the lowest rate that I have seen is $2.30 (which is a country property) and the highest was a little over $4.00 (OUCH).  The tax rate of the community I live in is $3.52 which is a little bit on the higher side but it is also a newer community and the newer communities have not had time to pay down their bonds so the MUD tax is almost always higher in a newer community. 

Houston is totally unique in all the MUD districts we have.  I don't know why these area around here didn't incorporate way back when.  Spring does not actually have a town.  I think if it is in Northwest Harris County and they don't know what to call it; it got thrown in to Spring.  Until just recently The Woodlands was just a big Spring zip code but they recently took steps to protect themself from annexation by Houston.   

Feb 28, 2008 05:00 AM
Gary White~Grand Rapids Home Selling Pro Call: 616-821-9375
Flexit Realty "Flexible Home Selling Solutions" - Grand Rapids, MI
Real Estate Services You can Trust!
Hi Marchel, high taxes is relative and the lack of state income taxes is a real bonus to everyone living there.  Nice reminder of the states benefits.
Feb 28, 2008 10:47 AM
Marchel Peterson
Results Realty - Spring, TX
Spring TX Real Estate E-Pro
Andrew, so is that the toll roads that they are proposing the hike on?  I thought it was expensive going through NJ when we moved our daughter's furniture to NY.  I can't imagin what an 800% hike will do. Here in Texas there is a new tax on small businesses and I don't think it is going to be a good thing for us either. 
Feb 28, 2008 02:22 PM
Marchel Peterson
Results Realty - Spring, TX
Spring TX Real Estate E-Pro
Gary, It is relative and when you look at the amount of house you get for your money it just doesn't seem quite so bad.  That is just one of the things that needs to be kept in to the mix when you are looking in Texas because it does make a big difference on how much the monthly bill will be.
Feb 28, 2008 02:24 PM
Shirley Parks
Sands Realty 210-414-0966 - San Antonio, TX
Broker, 210-414-0966, San Antonio TX Real Estate

Hi Marchel Just had a couple down from New Jersey and they were not aware that TEXAS does not have a state income tax. They were very happy to hear the good news. They are looking to move to San Antonio in May-June timeframe. The husband is being transferred here by his company.

 

Mar 01, 2008 05:26 AM
Courtney Fontenot
Alpha Prosperity Management - Missouri City, TX
NAR Certified REPA, REW
Marchel, thanks for breaking this down. I live in Sienna Plantation and our taxes are very high. But I wouldn't trade it, when you think about how much home you get for your money.
Mar 01, 2008 05:58 AM
Liz Carter
Liz Carter & Team Realty-Your Real Estate Resource For Life! - Katy, TX
Broker/Owner of Liz Carter & Team Realty, Katy TX (Houston)
Hi Marchel, great post as always...really like the house in the clouds :), fits perfectly! spreading love in the rain, Liz
Mar 01, 2008 11:39 AM
Marchel Peterson
Results Realty - Spring, TX
Spring TX Real Estate E-Pro

SHIRLEY, I think it really helps out of state people deal with our property taxes when they find out there is no state income tax.  We were freaked out about the high taxes until we found that out then it didn't look so bad.

COURTNEY, I live in a subdivision with a fairly high MUD tax which makes my taxes higher; but I LOVE my subdivison and I think it is worth it.  We do get a lot of home for the money. 

LIZ, Isn't that house cute!  That came from the real estate graphic site. 

Mar 01, 2008 01:36 PM
Anonymous
Kat

What can one do to get around high HOAs? Also, are there any Northern or communities in Conroe or College Station with no MUD tax? Thanks.

May 30, 2010 05:56 AM
#14
Marchel Peterson
Results Realty - Spring, TX
Spring TX Real Estate E-Pro

Kat, I'm not a College Station agent but there are homes in the city of Conroe and Tomball that are not in an HOA.  There are also HOA's that don't have high fees.  My HOA is only $250 per year.

Jun 01, 2010 10:48 AM
Anonymous
Claudia Oliver

I live in Friendwood and my taxes are to high . can you offer any advise to get help with this .

Thanks

Claudia Oliver

 

Jun 21, 2010 01:44 AM
#16
Marchel Peterson
Results Realty - Spring, TX
Spring TX Real Estate E-Pro

Claudia,  You can fight your taxes yourself or there are also companies that will fight them for you but they keep a small percentage.  If you would like for me to send you some comparables to see if it is worth it please email me and I will be glad to do that for you.

Jun 21, 2010 04:40 AM