If you are looking to own a home in Texas, you should expect to pay one of the highest property tax rates in the United States. According to WalletHub’s 2016’s Property Taxes by State report, Texas is ranked fifth-highest in the country. However, when deciding which state to live in, in addition to considering the tax standpoint, you should also consider vehicle property tax rates, state income tax rates and state sales taxes. Here is a breakdown of how property taxes in Texas may affect your decision.

Average Property Taxes

The average effective property tax rate in the Lone Star state is 1.94% of a home’s value. On a median home value, as of August 2015 at $200,000, this equates to $3,880. For the average home property assessed value in Texas, the tax average is $4,337. Texas Comptroller of Public Accounts Glenn Hegar is responsible for preparing an annual list on property taxes collected by region, city and school district, and presenting the information online. The latest available information from 2014 reveals that Fort Bend County, which includes the city of Sugarland, has the highest effective property tax rate at 2.41%. Tarrant County, including the cities of Arlington and Fort Worth, is second in the state at 2.34%. The third-highest property tax rate in Texas is in Harris County, home of Houston and its suburbs, at 2.3%.

However, these effective tax rates include multiple categories of assessed property taxes that are applied by different authorities within different regions. First, cities within Texas can assign up to 2% taxes to a property’s value, included in the real estate tax; but this is, in effect, a sales tax. Counties within Texas have a further option of imposing up to 1.5% on a property’s value, transit authorities can impose a 1% added tax on property values for homes in their districts, and Special Purpose Districts can impose up to 2% within their districts. School districts also can add a tax rate if they so choose.

All of these tax assessments make up the basic property tax rate and are assessed on a property’s market or assessed value. There is no state-wide tax rate in Texas, only local taxing units, such as those mentioned here.

How Texas Compares to the National Average

The national average of property taxes is $2,720 annually at 1.21% of assessed value. The average property tax rate in Texas is 60% higher than the national average and is one of the top five highest-paying states for property tax. Texas also makes Bankrate.com’s Terrible 10 list of most regressive state tax systems in the United states, ranking at No. 5 with a total effective tax rate on the middle class of 8.8% including property, vehicle, income and sales taxes. Even though Texas does not have income or vehicle property taxes, it still ranks as one of the most taxed states in the country.

How Texas Compares to its Neighboring States

The neighboring states to Texas, from strictly a property tax rate, do not have such high taxes. Oklahoma is the worst in comparison to Texas and holds as the 21st most expensive state at 0.87% for property tax, still less than half of Texas’s rate. While New Mexico is the 12th-least taxed at 0.72%, Arkansas is the eighth-least taxed on property at 0.62%, and Louisiana is the third-cheapest property tax rate state in the country at only a 0.48% effective tax rate.

Other counties within Texas are cheaper than the national average tax rate, but these are generally more rural counties with less population and community services.

Virginia Property Tax Guide

Related Articles
  1. Taxes

    Your Property Tax Assessment: What Does It Mean?

    Understanding your property taxes can protect you from financial shocks.
  2. Taxes

    5 State Tax Issues For When You Leave the Military

    When you're budgeting for post-military life, certain state tax issues need to be considered.
  3. Taxes

    10 Best States for Property Taxes in 2016

    Whether you are thinking of moving or just curious to see whether your state is in the top 10, these rankings are eye-opening.
  4. Taxes

    Sell Your Rental Property for a Profit

    Learn how to sell your rental property for a profit. Find out how to master the selling process.
  5. Taxes

    How Does a Tax-Free Exchange Work?

    In regards to the sale of property, particularly in real estate, a 1031 exchange is increasingly being recognized for its tax benefits to investors of all levels.
  6. Investing

    American Recession: What's happening in Texas?

    Learn why the oil bust may not mean disaster for Texas' economy and discover what Texas has done to prepare for the downturn.
  7. Personal Finance

    Which States Are Community Property States?

    There are nine community property states. Here's what 'community property' means when a couple divorces.
  8. Taxes

    10 States With High Sales Taxes

    Most states have sales taxes of some kind for goods and services. Here's a rundown of the states that have the highest sales taxes.
  9. Taxes

    How Much Tax Do You Really Pay?

    When you add direct and indirect taxes together, your real tax rate is much more than you expected.
  10. Taxes

    10 Things to Know About 1031 Exchanges

    Real estate swaps grow popular, but traps are many. Here's 10 things to know when considering 1031 swaps. Also: Beware new rules on vacation homes.
Frequently Asked Questions
  1. What is the difference between market capitalization and market value?

    Understand the difference between market capitalization and market value, including the elements used for the calculation ...
  2. How is an accrued interest entry made in accounting?

    Learn how to create common journal entries for accrued interest, including adjusting entries and delayed bond issues sold ...
  3. What's the largest charitable donation Warren Buffett ever made?

    Learn about Warren Buffett's biggest financial contributions and how his estate is to be divided between charity and Buffett's ...
  4. How Does a Company Get Listed on the OTCBB?

    Learn about the stipulations for companies quoted in the over-the-counter bulletin board (OTCBB) service as over-the-counter ...
Trading Center