What Are Property Taxes and How Do They Actually Work?

Key Takeaways:

• How Property Taxes Work in Texas: Learn how property taxes fund local services and how appraisal districts assess property values using market data, location, and key features.
• How Tax Rates and Exemptions Shape Your Bill: Explore how local taxing entities set rates and how exemptions like homestead, over-65, and veteran relief can lower your taxable value.
• How to Appeal an Inflated Property Value: This guide will walk you through the protest process, from reviewing your notice to preparing comps, and show you how our team can help advocate for a fair outcome.

Opening a property tax notice in Texas often feels like bracing for a surprise. The numbers rarely stay steady, and figuring out how they’re calculated can feel like decoding a puzzle without a key. From families in growing neighborhoods to small business owners holding down a corner lot, many property owners end up in awe over why their tax bill keeps rising yearly.

Our team at Texas Tax Protest has worked with thousands of Texans who’ve been through the same. Beneath all the paperwork and legal terms lies a straightforward process. Appraisal districts rely on specific factors, from neighborhood sales to square footage, and use targeted adjustments to land on a final value. Once you see how that formula works, you’ll be in a stronger position to fight inflated assessments.

In this post, we’ll break down the meaning of property taxes in straightforward terms. 

How Property Taxes Work in Texas and Why They Matter

Property taxes play a significant role in daily life for Texas homeowners and commercial property owners. These charges help power the services that keep your community running – schools, emergency response, road maintenance, and more. Since Texas does not collect income tax, local governments rely more heavily on property taxes to cover annual budgets. That structure places more weight on each assessment and increases the impact of changes to your property’s tax rate.

Where Texas Property Taxes Go

In Texas, property taxes help fund the core services that shape your everyday experience. Local taxing entities – such as school districts, counties, cities, and utility districts – set their rates based on what they must cover each year. The funds are used for public school systems, police and fire departments, street repairs, garbage pickup, and public libraries, among other services. Since Texas has no statewide property tax, all collections stay within your county or municipality. 

How Texas Property Taxes Compare to Other States

Across the country, states handle property taxes in different ways. In California, for example, Proposition 13 limits how much a property’s taxable value can rise yearly, no more than 2 percent unless the property is sold. Likewise, New York and Massachusetts also place limits on how quickly assessed values can grow, which creates more stable expectations for property owners. 

Learning how these tax systems work makes it easier for property owners to prepare, ask the right questions, and challenge assessments that don’t reflect their property’s actual market position.

How Property Tax Rates Are Determined

Local property tax rates may look complex, but the formula behind them follows a consistent pattern across Texas. Public budget needs and property values drive rates within each taxing district. Here’s a breakdown of how these rates come together:

• Local budgets are set first: Each year, school districts, counties, cities, and special districts decide how much money they need to fund services like public schools, road repairs, and emergency response.
• Appraised values are added together: Local appraisal districts calculate the total taxable value of all properties within their area. This figure reflects the combined value of residential, commercial, and land parcels.
• A tax rate is calculated: The total budget is divided by the total taxable value to produce a rate. In Texas, this is often shown as a dollar amount per $100 of assessed value.
• The tax rate is applied to your property. Once your appraisal district assigns a value to your property, that value is multiplied by the local rate to determine what you owe.
• Public input is part of the process: Local taxing entities are required to hold public meetings to review proposed rates. Homeowners can attend, ask questions, and share feedback before final rates are adopted.

Factors That Influence Your Property Tax Bill

Property tax bills can feel unpredictable, but they come down to a few specific factors. Every year, appraisal districts reassess property values while local taxing agencies adjust their rates. Your final bill reflects how those pieces interact, plus any exemptions you’re eligible for. Here’s what plays into that calculation.

Your Property’s Assessed Value Sets the Foundation

Each year, appraisal districts estimate what your home or commercial property would sell for on the open market as of January 1st. That figure becomes your assessed value.

Appraisers rely on local sales data from nearby properties. They use a comparative analysis method to review recent sales of similar homes. Since no two properties are identical, mathematical adjustments are applied. For instance, if your home has a new roof or an added bathroom, those upgrades may increase your value. That difference is also factored in if another property has updates that your home lacks.

Local Tax Rates Multiply the Impact

Once your assessed value is set, local taxing entities apply their individual rates. These agencies – such as school districts, counties, and cities – set their budgets independently. Their rates are added to create your total property tax rate, usually listed as a dollar amount per $100 value. When a city or district increases its rate, your bill may rise even if your property value stays the same.

Exemptions Can Lower Your Bill

Texas offers a range of exemptions that reduce the taxable portion of your property’s value. Common examples include homestead exemptions for primary residences, exemptions for homeowners age 65 or older, and additional relief for disabled veterans. Each exemption subtracts a fixed amount from your assessed value, which can lower the total amount you owe. 

Common Property Tax Exemptions and How to Qualify

Texas property taxes can feel overwhelming at times, but exemptions are available that may help reduce the amount you owe. Knowing which ones apply to your situation and how to file for them can lead to meaningful savings over time.

Homestead Exemption

This exemption is the most widely used and applies to your primary residence. Homeowners must own and occupy the property as their main residence on January 1st of the tax year. To apply, submit an application through your county appraisal district along with proof of residency, such as a driver’s license showing the same address.

Over-65 and Disabled Person Exemptions

Homeowners who reach age 65 before the new tax year or meet Texas disability requirements may receive additional relief. These exemptions can reduce taxable value and may freeze school district taxes while the home remains your primary residence. Applications must include valid ID and any medical documentation required by your appraisal district.

Veteran and Disabled Veteran Exemptions

Service-connected disabilities may qualify current or former members of the U.S. military for partial or full property tax exemptions. Surviving spouses of disabled veterans or those killed in action may also be eligible. Applicants usually need discharge papers (DD214) and documentation from the Department of Veterans Affairs that outlines their disability rating.

Other Special Exemptions

Some exemptions apply to properties used for agriculture, wildlife management, or renewable energy installations. Each exemption has its own criteria. For example, agricultural exemptions require proof of consistent land use for qualifying purposes in previous years.

How Exemptions Are Calculated

Exemption savings depend on the exemption amount and the local tax rates applied to your property. For example, a $40,000 homestead exemption lowers your taxable value by that amount. Additional exemptions can be layered on top to reduce the bill further. However, most forms must be filed between January 1 and April 30, so mark deadlines on your calendar or set reminders.

How to Appeal a Property Tax Assessment in Texas

The annual property tax assessment notice can catch many Texans off guard. If the valuation seems inflated, a formal appeal can be an effective way to reduce your tax bill. The process is more accessible than most expect, and understanding the right steps is critical.

Step 1: Review Your Assessment Notice

Each spring, local appraisal districts mail out notices listing your property’s appraised value. Double-check details like square footage, property features, and lot size. Though uncommon, errors happen and can provide substantial grounds for protest.

Step 2: Gather Comparable Properties

Finding comps recently sold in your neighborhood is central to building your case. However, the trick isn’t just to snag the lowest prices and adjust for differences. For example, if your neighbor’s house sold for less but lacks a renovated kitchen, subtract an estimated value for those upgrades from your home’s assessment. Likewise, add value if your home lacks a feature others have. These mathematical adjustments transform raw sales prices into apples-to-apples comparisons.

Step 3: File Your Protest Before the Deadline

Typically, Texas property owners must submit their protest to their local appraisal district (like TAD in Tarrant County) within 30 days of receiving their assessment notice or by May 15th, whichever comes later. Missing the deadline could mean waiting a year for another shot.

Step 4: Prepare Your Evidence

Organize your supporting documents – comparable sales, recent appraisals, or evidence of property damage or needed repairs. Clear, concise evidence makes your case far stronger when presented to the appraisal review board.

Step 5: Attend Your Hearing or File Online

Most districts allow protests online or in person. At your hearing, present your adjusted comps and any other documentation. Appraisal review boards typically look for logical, data-driven arguments and clear justification for a lower value. Appealing your property tax assessment may sound intimidating, but with preparation and attention to detail, it’s a real opportunity to keep your property taxes fair and in check.

Need Help? Texas Tax Protest Can Represent You

Appealing your property tax assessment can feel like a lot, but you don’t have to go through it alone. Our team at Texas Tax Protest steps in with data-backed strategies, experience in front of local review boards, and a commitment to making the process more fair for property owners. When you need someone to fight on your behalf, we’re ready to help you challenge inflated values and push for a more accurate outcome.

Final Thoughts

Property taxes shape how much stays in your pocket each year and how your local community operates. In Texas, where counties depend heavily on property tax revenue to fund essential services, clarity around your assessed value matters. For many homeowners and commercial property owners, that clarity starts with asking the right questions. What factors influence your appraisal? Are the numbers accurate? Do any exemptions apply?

At Texas Tax Protest, we work with property owners who want answers and results. Our team digs into the details of each case, identifies opportunities, and builds strategies rooted in data. When your tax bill feels too high, you shouldn’t have to face it alone. We’re here to help you challenge inflated assessments and fight for a more balanced outcome.

Read more: 

• Texas Property Tax Rates Explained: What Every Homeowner Should Know
• Texas Property Tax Rates by City: Where Does Your Area Rank?
• Texas Disaster Declarations and How They Impact Your Property Taxes

Frequently Asked Questions About the Meaning of Property Taxes

What happens if I don’t pay my property taxes?

Failing to pay your property taxes can lead to penalties, interest charges, and even foreclosure. Local tax authorities may place a lien on your property, and unpaid taxes can eventually result in loss of ownership. Staying on top of your property tax bills is key to protecting your home or investment.

How often must property taxes be paid?

In Texas, property taxes are typically paid once a year, although some areas may allow installment payments. The due date is usually January 31st. Paying on time helps you avoid late fees and additional interest.

Who has to pay property taxes?

Anyone who owns real property, such as a house, commercial building, or land, is responsible for paying property taxes. This includes homeowners, commercial property owners, and even vacant landowners. 

How are property taxes calculated?

Property taxes are determined by assessing your property’s market value and applying the local tax rate set by taxing authorities. The appraisal district estimates what your property could sell for as of January 1st each year. Then, exemptions and local rates are factored in to determine your final bill.

Can property taxes increase over time?

Yes, property taxes can rise yearly, especially if your property’s appraised value goes up or if local taxing entities raise their rates. Growth in your area, property improvements, or housing market changes can all contribute.

How are property taxes used by the government?

Property taxes fund essential local services: public schools, police and fire departments, road repairs, libraries, etc. This steady source of revenue keeps your community running and supports quality-of-life infrastructure.

Sources:

1. Texas Comptroller of Public Accounts. (n.d.). Property tax assistance. https://comptroller.texas.gov/taxes/property-tax/ lincolninst.edu+10comptroller.texas.gov+10robertsoncad.com+10
2. Texas Comptroller of Public Accounts. (n.d.). Appraisal protests and appeals. https://comptroller.texas.gov/taxes/property-tax/protests/index.php
3. Keshner, Andrew. (2025, May 7). Want to challenge your property‑tax bill? Here’s the smart way to do it — and how much you could save. MarketWatch. https://www.marketwatch.com/story/want-to-challenge-your-property-tax-bill-heres-the-smart-way-to-do-it-and-how-much-you-could-save-53103ff1