Property taxes in Texas

These numbers don’t reveal all the details, and multiple factors can affect the amount of property taxes owed by Texas residents. Here’s everything you need to know about property tax rates in Texas and how they compare to other parts of the country.

What are the property taxes in Texas?

The average property tax rate in the Lone Star State is about 1.80%. In other words, if you own a house in Texas that is valued at $350,000 by the tax assessor, your property tax rate would be $6,300 per year.

According to the Texas Comptroller’s Office website, there is no state level property tax in Texas. Only local taxing units (e.g. cities, counties, school districts) collect property taxes. the 1.80% figure is an average of the property taxes collected by taxing units in the state.

How is property tax calculated in Texas?

Local governments in Texas calculate property taxes by using the fair market value of the property. Each county has a property assessment district and a team of tax assessors who assess the value of each taxable property.

Once the tax assessor determines the value of the property, the taxpayer pays a property tax equal to a percentage of the fair market value of the property. Therefore, if the value of a property rises, so does the property tax.

A property may be within the jurisdiction of one or more local taxing entities (for example, a city, university district, hospital district, etc.), each of which has its own tax rate. A taxpayer’s annual tax rate is the sum of the taxing entities that have jurisdiction over the address of the property. A taxpayer’s annual tax bill details the final value and a full breakdown of the entities that collect property taxes.

For example, a property located within the City of Dallas, Texas, would be subject to property taxes to the City of Dallas and Dallas County. If the property is located within the Dallas Independent School District, then the taxpayer owes the school district additional taxes in addition to other local tax units.

If the taxpayer disagrees with the local tax assessor’s assessed value, they can appeal to the local jurisdiction’s Assessment Review Board (ARB). Depending on their individual circumstances, Texas homeowners may be able to request a reassessment of their property value or apply for a property tax abatement.

Texas property taxes compared to other states

Every homeowner’s situation is different, depending on the tax rate levied by the local taxing authority. On average, homeowners in Texas pay more in property taxes than homeowners living in other states. This fact is true even when accounting for states that do not levy personal income taxes on their residents.

According to WalletHub’s property tax study, the state’s average residential property tax rate is 1.80 percent, the seventh highest in the country. The only states with higher average tax rates are Wisconsin, Vermont, Connecticut, New Hampshire, Illinois and New Jersey.

List of states by effective property tax rate

Below is a list of all 50 states and the District of Columbia, ranked from highest to lowest effective property tax rate.

Texas vs California

Despite being the third most expensive state, California has an effective property tax rate of 0.76%, which is lower than the Texas property tax rate of 1.80% and the national average property tax rate of 1.07%.

In California, property taxes are calculated ad valorem based on the value of your home. California’s Proposition 13 requires that to calculate your property taxes, multiply the state tax rate by the tax assessed value of your property. Prop 13 limits property taxes to 1% of the value of your home and does not allow tax assessments to rise more than 2% per year.

As in Texas, the real estate tax rate would depend on your county and the price of your home. This is why if you live in a home with a high estimated property value, you may end up paying more in property taxes overall than those of a home with a lower value, despite the lower tax rate in your county.

For example, residents of San Francisco pay a median annual property tax of $6,019 and an average effective property tax rate of 0.65%. Residents of Sierra County pay a lower median property tax of $1,496 per year, but have a higher effective tax rate of 0.95%.

Total California Tax Burden

Your total tax burden is the sum of your property taxes, personal income taxes and total sales and excise taxes. A recent WalletHub study ranked states from the highest (New York at 12.75%) to the lowest (Alaska at 5.06%) in terms of total tax burden.

Texas ranked 32nd on the list with a total tax burden of 8.22%. Since Texas has no personal income tax, the tax burden is split between the property tax burden (3.97%) and the sales tax burden (4.25%).

California ranks ninth with a higher total tax burden of 9.72%. California does have an income tax, so the total tax burden is split into three parts, property tax (2.76%), income tax (3.80%) and sales tax (3.16%). This is why you pay a lower property tax rate in California than in Texas, but still face a higher tax burden overall.

Texas vs Florida

Florida’s effective property tax rate of 0.89% is lower than the Texas rate and the national average rate. Like Texas, Florida has no personal income tax.

On average, Floridians pay $1,914 per year in taxes on a home with a median value in the state of $215,300. Texans pay an average of $3,099 per year in taxes on a home with a median value of $172,500 in the state. The average home price in Florida is higher than in Texas, but because Florida has very low effective property taxes, you end up paying lower property taxes.

The actual amount of property taxes paid by Florida homeowners varies from county to county. For example, if you live in St. Johns County, one of the more affluent counties in Florida, you pay an average effective property tax rate of 0.88% and pay an average property tax of $1,885. If you live in DeSoto, an inland county with a lower income, you pay an average of only $1,014 in property taxes, despite a higher effective tax rate of 1.21%.

Florida’s total tax burden

Florida has one of the lowest total tax burdens in the country (6.64%), with only five states having lower tax burdens. Florida has no personal income tax, so your total tax burden only includes a property tax burden (2.77%) and a sales tax burden (3.87%). Despite having no personal income tax, Texas’ total tax burden is much higher than Florida’s (8.22%). Its property tax burden (3.97%) and sales tax burden (4.25%) are both higher than Florida’s tax rates.

Texas vs. New York

While New Yorkers face an above-average effective property tax rate of 1.72%, that rate is still lower than the Texas property tax rate of 1.80%. Unlike Texas, New York does not have a personal property tax. New York does not tax items such as vehicles (including mobile homes), but only real estate property.

Like Texas, Florida and California, New York has a diverse population with varying incomes and each county takes this into account when determining its property taxes. For example, affluent Westchester County levies the highest property taxes with an average of $9,003 per year in property taxes, while St. Lawrence County levies an average of only $1,674 per year in property taxes.

Total tax burden in New York

New Yorkers face the highest overall tax burden, paying 4.43% in property taxes, 4.90% in income taxes, and 3.42% in sales taxes, for a total tax burden of 12.75%. Texans face a lower tax burden than New Yorkers in every area except sales tax; Texans face a slightly higher sales tax burden of 4.25% because they do not pay income tax.

Which counties in Texas have the lowest property taxes?

Texas is divided into 254 counties, more than any other state in the United States. The population of each county ranges from just over 100 people (for example, Loving County near New Mexico) to over 4 million people (for example, Harris County, home to Houston, Texas).

Each county levies a different property tax rate on its residents. The following are the top three counties with the lowest property taxes.

1. Terrell County

Terrell County is located in western Texas and borders Mexico to the south. Its county seat is Sanderson. With only 760 residents, the county is the seventh least populous county in the Lone Star State.

According to the Terrell County Appraisal District, Terrell County has a combined property tax rate of 0.8%, including 0.8% maintenance and operations (M&O) and 0% interest and sinking (I&S).

A homeowner with $350,000 worth of property in Terrell County would pay $2,800 per year in property taxes.

2. Ward County

Ward County is located in West Texas. Its county seat is Monahans and its population is 11,644.

According to the Ward County Appraisal District, Ward County levies a combined tax rate of 0.69%. Other local taxing units also levy property taxes, including the City of Monahans (0.35%), the City of Grand Falls (approximately 0.22%), the City of Wickett (approximately 0.16%), and Ward County Water Improvement District No. 2 (approximately 0.01%).

In Monahans, Texas, a homeowner with a property valued at $350,000 would pay a total of 1.04% of the property tax, or approximately $3,640.

3. Zapata County

Zapata County is a county in southern Texas, just 200 miles from San Antonio and bordered by Mexico to the south and west. The county seat is Zapata and has a total population of 13,889.

According to the Zapata County Appraisal District, the county’s combined property tax rate is approximately 1.55%, including 0.639% from the county, 0.215% from CI-Bond entities, and approximately 0.7% from research, development and other special taxes.

A homeowner with $350,000 worth of property in Zapata County would pay $5,425 per year in property taxes.

Which other states do not pay income tax?

In addition to Texas, there are six other states that do not levy income tax.

1. Alaska
2. Florida
3. Nevada
4. South Dakota
5. Tennessee (as of January 1, 2021)
6. Wyoming

Two states are sometimes mistakenly referred to as no-income tax states.

New Hampshire does not levy a payroll income tax, but makes up for it with other types of income taxes, such as dividends or interest payments.
Washington does not levy a personal or corporate income tax but levies a capital gains tax (7%) as of 2021.

How the absence of income tax affects your income

If you live in a state that does not levy personal income tax, this means that your state government does not require you to pay taxes from your wages, pension, retirement plan (such as a 401(k) plan or IRA) or Social Security income.

Example. A person earning $80,000 per year living in a state that imposes a 5.25% tax rate on their income bracket must pay $4,200 per year in income taxes, reducing their annual income to $75,800 (before other taxes are taken into account).

What other states have property tax rates similar to Texas?

The average effective property tax rate in the following states is similar to that of Texas. In these states, as in Texas, local governments levy property taxes, not the state itself.

The effective property tax rates listed represent a homeowner’s average property taxes in a given state. Since local governments vary in their tax rates, your exact individual tax rate will depend on your specific location in the state.

Vermont

• Vermont has the fifth highest average effective property tax rate in the country at 1.90%. The median home value of $227,700 is higher than the median home value of $172,500 in Texas.
• In addition to local property taxes, Vermont levies an additional property tax that supports local schools called the education tax. This statewide education tax is one of the reasons for Vermont’s high property tax rates.
• Vermont also requires its municipalities to reassess homes that are assessed at less than 80% of their market value. Otherwise, the assessment process varies from town to town.

Nebraska

• The average effective property tax rate in Nebraska is 1.73%, the highest rate after Texas and the 8th highest overall. Three counties (Douglas, Sarpy and Scotts Bluff) have property tax rates of over 2%.
• Like Texas, Nebraska does not allow property taxes, so all taxes are collected at the local level. Tax rates may vary from area to area as local taxing authorities, such as school districts and municipalities, are responsible for collecting taxes; local taxing authorities collect taxes and apply rates based on their specific revenue needs.

Connecticut

• Connecticut’s average effective property tax rate of 2.14% is higher than Texas, Vermont and Nebraska, twice the national average (1.07%), and the fourth highest in the country. The median home value in Connecticut is $275,400, well above the Texas median home value of $172,500.
• In Connecticut, counties are not responsible for collecting property taxes; instead, cities and towns set the tax rates and collect the taxes. In order to do this, local municipalities assign assessors at least every five years to determine the fair market value of a property. The assessed value of the property is equal to 70% of its market value and the homeowner pays taxes at this lower amount.

Why are property taxes so high in Texas?

Texans face one of the highest property taxes in the country, and aren’t happy about it. A recent University of Texas poll found that 54% of Texans think they pay too much in property taxes, 26% think they pay what appears to be the right amount and only 5% think they pay too little in property taxes.

No state income tax
Most states generate their revenue through three sources: income tax, property tax and sales tax. States use these funds for education, building and repairing infrastructure, providing health insurance for low-income families, and other services that are essential to building healthy communities.

Seven states, including Texas, do not levy a state income tax. To make up for this loss of revenue, these states tend to levy more or higher property taxes. Therefore, because Texans do not pay individual state income taxes, they end up paying higher property taxes.

Despite the high property taxes, Texans face the 19th lowest total tax burden (8.19%), including income from sales and property taxes.

High property values

While some states are starting to see home prices level off as we begin to put Covid-19 behind us, the cost of buying a home in Texas is still higher than it was before the pandemic. These high home prices are driven by many factors, including Texas’ growing economy, explosive population growth, the cost of land, government regulations controlling land use and construction, and a shortage of skilled construction workers.

In Texas, property taxes are ad valorem, which means they are based on the assessed value of your property, not the market price. Those who live in higher priced homes tend to have a higher assessed value of their property and will therefore pay higher property taxes.

Texans have their homes assessed every year. Therefore, the more your home increases in value over the years, the higher the property taxes you will owe.

Let’s say you live in Dallas County, where the average property tax rate is about 2%. If your house is assessed at $300,000, you will pay about $6,000 in property taxes. If the following year, your house is assessed at $350,000, you will pay an average of $7,000 per year in property taxes.

Local Authorities Determine Taxes

In the Lone Star State, local government entities are responsible for setting your property taxes, not the state. Your local property taxes help pay firefighter and police salaries, fund public schools, libraries, playgrounds, roads and streets, and pay for emergency medical services.

While you may like to see your tax dollars working in your community, local government property taxes can be mismanaged, regressive and vary by geographic area and property type. You may end up paying a higher tax rate than you would for a similar home in the next community over, simply because of your particular local government’s priorities.

The state of Texas cannot regulate or interfere with property taxes, even if it is to increase funding for public education. It is up to local authorities to decide how much of your taxpayer money goes to each service, and you may end up paying for services you don’t use or don’t think are necessary.

In addition, because local governments rely on property taxes as a source of revenue, Texans who fail to pay these taxes on time face stiff penalties.

Which states have the worst property taxes?

According to WalletHub’s property tax study, the three states with the highest overall property tax rates are New Hampshire (ranked 49th), Illinois (50th) and New Jersey (51st).

Below are details of each state’s tax rates and total tax burden, i.e. the percentage of an individual’s total income that must be spent on taxes.

New Jersey

The Garden State has the highest overall property tax rate at 2.49%. The Garden State has the seventh highest median home value at $335,000, which accounts for the high overall property value in the state.

Example. A person living in a home worth $350,000 in New Jersey must pay $8,715 in property taxes each year.

New Jersey’s total tax burden

According to a separate WalletHub study on tax burden, New Jersey is the 6th highest state in terms of total tax burden at 10.11%. 4.98% of the total tax burden is the property tax burden, 2.54% is the personal income tax burden and 2.59% is the sales and excise tax burden.

Illinois

Although the median home value in Illinois is only $194,500 ($22,000 more than in Texas), this prairie state has the second highest property tax rate in the country at 2.27%.

Case in point. A person living in an Illinois property worth $350,000 must pay $7,945 in property taxes each year.

Total Tax Burden in Illinois

According to WalletHub’s tax burden study, Illinois has a total tax burden of 9.70%, which is the 10th highest in the country. Of this, 3.98% is the property tax burden, while 2.22% is the personal income tax burden and 3.50% is the sales and excise tax burden.

New Hampshire

Ranked second only to Illinois, the Granite State has the third highest property tax rate in the United States at 2.18%. The median property value in the state is $261,700, which is 51% higher than the value of property in Texas.

Case in point. A person living in New Hampshire on a property valued at $350,000 must pay $7,630 in property taxes each year.

Total Tax Burden in New Hampshire

Although New Hampshire has the third highest property tax rate in the country, WalletHub’s tax burden study shows that New Hampshire has the fifth lowest total tax burden in the country at 6.41%. This figure includes a property tax burden of 5.11%, a personal income tax burden of 0.14%, and a sales and excise tax burden of 1.16%.

How bad is Texas’ overall taxation?

While Texas ranks in the top 10 in the country for average property tax rates, you may be wondering about other elements of the state’s tax system and how each compares to other states.

According to statistics compiled by the independent, non-profit Tax Foundation, the following taxes are levied in Texas.

State Sales Tax

• The Lone Star State has a state sales tax rate of 6.25%, which ranks 13th out of 51 states in the country.This rate does not include local sales taxes, which average 1.95%.

Franchise Tax

• Texas is one of the few states in the country that does not levy a corporate income tax on resident businesses. It does levy a franchise tax on businesses with annual revenues in excess of $1.23 million. The tax rate is 0.375% for retail and wholesale businesses and 0.75% for other industries.

Gasoline Tax

• Texas has one of the lowest gasoline tax rates in the United States at only $0.20 per gallon (44th out of 51 states).

Cigarette tax

• Texas imposes a tax of $1.41 per pack of 20 standard cigarettes, ranking 30th out of 51 states.

Who benefits from no income tax and high property taxes?

Living in a state with no income tax has both benefits and drawbacks for individuals and businesses. While no income tax is good for all households from a financial point of view, the more income a homeowner has, the more money they can save by living in a state with no income tax.

States with no income tax can compensate by raising the rates of other taxes or by reducing spending on public infrastructure. In the former case, residents may still have less income because the money not spent on income taxes is spent through other channels (e.g. high property taxes, high sales taxes and excise taxes).

If a country that does not levy an income tax chooses to spend less on public infrastructure, residents may receive fewer public services and benefits as a result. For example, income taxes are often used to fund state-run road networks, educational infrastructure (e.g. high schools, libraries), local law enforcement agencies and other public services.

Example.

• In Wyoming, a single person earning $1 million per year must pay an effective tax rate of 32.94% ($329,428) to the federal government but $0 to the state, resulting in an after-tax income of $670,572.
• In California, a single person earning $1,000,000 per year would similarly have to pay 32.94% of the effective federal tax rate ($329,428), but would also pay 13.24% of the effective federal state tax rate ($132,372), resulting in an after-tax income of $538,200.