How Property Taxes Impact Your Budget When Shopping For A New Home

  • Cindy Kocsis
  • 12/14/21

The excitement of shopping for a new home can be exhilarating. You’ve been preparing financially for this investment you are about to make. However, something not everyone realizes is how your future home’s property taxes can impact the budget you set for the cost of your home. It’s important to talk to your realtor and do the research on school taxes and property taxes in the area in which you want to buy and move to.

What You Need To Know About Texas Property Taxes

There are plenty of reasons to move to the Dallas-Fort Worth area, including a great housing market and the cost of living. The NerdWallet cost of living calculator allows you to compare the cost of living in two different cities. But what about the property taxes? Let’s take a look at what homeowners need to know about property taxes in Texas.

Texas is one of seven states in the United States that doesn’t collect personal income tax. Instead, Texas relies on sales tax, the taxation of business and personal property taxes, and real estate taxes. Even though property taxes in Texas remain one of the highest in the nation, the state’s overall tax burden remains one of the lowest in the nation. Taxes in Texas are assessed and collected at the local level. They are used to fund the city, counties, local school districts, and special districts. The taxes help pay for the essential community needs of the public schools, city and county roads, police and fire departments, and much more.

Each jurisdiction in a county is responsible for establishing its own tax rate. The jurisdictions include the school district, county, city, local community college, and emergency services. Texas also operates out of a school finance system. The state guarantees every school district a certain amount of funding for each student. The state lawmakers determine the base number per student. The school districts get money from their local property taxes and the state. They use the local property tax revenue first, then the state pays the balance.

Texas Property Taxes By County

The DFW metro area is made up of two major cities, Dallas and Fort Worth. Each city has their own property tax rate. Within these two cities are four major counties:

Dallas County 

Dallas County taxes are significantly higher than the national average. The average homeowner there pays $3,124 annually in property taxes at a rate of 1.93%. More than half of that tax goes to the local schools. 

Tarrant County 

Tarrant County is west of Dallas and contains the cities of Fort Worth and Arlington. It has the fifth highest property taxes in the entire state. The taxes are higher in both Fort Worth and Arlington. Residents of both cities pay the county’s general rate of 0.234%. In Fort Worth, the city rate is 0.748% and the school district rate is 1.378%, which adds up to a total rate of 2.36%. In Arlington, the total rate is less than about 2.244%. 

Denton County 

Denton County is north of Dallas and Fort Worth and part of the DFW metropolitan area. The average Denton County homeowner pays $4,863 annually in property taxes on a median home value of $255,300. The city of Denton has some of the highest property taxes in the area.

Collin County

Collin County is the sixth most populated county in Texas. It also has the 15th highest property tax in the state. There are a lot of high-end homes and businesses in this county with exceptional schools. The high property tax rates are driven by the higher rates used to fund the local school districts.

Now that you know a little more about how the Texas property taxes are collected at the county level, you can use the Texas Property Tax Calculator to get an idea of what your yearly property tax would be. Your realtor can also provide more information to help you understand how Texas property taxes work and figure out how much the taxes will be for the area you purchase your dream home. 

Get in touch with a real estate agent today!

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