Texas · Property taxes
Texas property taxes and your escrow payment
Updated November 2026 · Every dollar figure is an example · Texas rules and limits change, check the current onesThe tax part of a Texas mortgage payment is big because Texas has no state income tax and local governments live on property tax, so the rate on a home is often around 1.5% to 2.5% of its taxed value a year, depending on the city, county and school district (illustrative). On a $400,000 home that is roughly $500 to $850 a month inside your payment before any exemption (illustrative). The homestead exemption and the 10% appraisal cap cut it, but only once you file for them, and the lender's first-year escrow estimate is often based on the seller's lower, capped bill, which is why so many Texans get a payment increase in year two.
How Texas property tax works, briefly
Every January 1 the county appraisal district puts a market value on your home. Each local unit that taxes you (the county, the city, the school district, maybe a college, a hospital district or a utility district) sets its own rate in late summer, and the rates add up to one total. The bill comes in October and is due by January 31. Property tax is paid in arrears, meaning the bill you get in October 2026 is for 2026.
Two things make Texas different. The rates are high, because there is no state income tax to share the load. And Texas does not require sale prices to be disclosed, so the appraisal district does not automatically see what you paid, though a new buyer's value tends to move to the price within a year or two.
The homestead exemption
A homestead exemption takes a chunk off the taxed value of the home you live in. You file once, with the appraisal district, and it stays until you move. The biggest piece is the school-district exemption, which the state sets for the whole of Texas: it was raised to $100,000 in 2023 and to $140,000 in 2025 (voters approved it in November 2025, and it applies from the 2025 tax year). Check the Texas Comptroller's site or your appraisal district for the amount that applies to your tax year, because it changes. Cities, counties and other units may add a percentage exemption of their own. People 65 or older and people with disabilities get an extra $60,000 off the school value and a ceiling on their school taxes.
File right after closing; you can apply as soon as you own and live in the home. If the seller already had a homestead exemption for the year you buy, which is the usual case, yours starts on January 1 of the next year; on a new home, or one the seller did not claim, it can start the day you qualify. The exemption follows the owner, not the house: the seller's ends when they move.
The 10% appraisal cap
Once your homestead exemption is in place, the taxed value of your home cannot rise more than 10% a year (plus the value of anything you build). In a fast market that cap builds up: a home worth $450,000 might be taxed on $380,000 because its owner has been there a while (illustrative). The catch for a buyer is that the cap resets at the sale. The new owner's taxed value starts from market value, which in practice means the price, and the cap only protects you from the second year of your own exemption onward.
This is the single most common reason a Texas escrow payment jumps. The seller's last tax bill was on the capped value with their exemption. Your first bill is on the full value, and until your own exemption is on file, with no exemption. If the lender set your escrow using the seller's bill, the account comes up short at the first annual review and the payment goes up to cover both the shortage and the new, higher estimate.
Where this lands on the Loan Estimate
Taxes touch three places on the three-page Loan Estimate:
- Page 1, Estimated Taxes, Insurance & Assessments. The monthly tax-and-insurance figure the lender is using, and whether it is in escrow. This is the number to check first: ask the lender what value and what rate it used.
- Section F, Prepaids. Property taxes due within a short time after closing, paid at closing. Close in the fall and this can be a full year's bill.
- Section G, Initial Escrow Payment at Closing. The starting balance for the escrow account: so many months of taxes and so many of insurance, plus a cushion of up to two months. The month count depends on the closing date and when the bills come due.
Because every lender guesses at the tax figure, two Loan Estimates can show very different Section G numbers for the same house, and neither is the lender being cheaper. The money is yours in both cases. When you compare lenders, set F and G aside and compare the rate and Section A. How to compare two Loan Estimates shows how, and the Loan Estimate checker reads Section A for you.
Worked example (illustrative)
A $400,000 purchase, a total tax rate of 2.0%, and a $140,000 school-district homestead exemption on a school rate of 1.0% within that total. The figures are made up to show the shape, and the exemption amount is the 2025 figure, which may change.
| Scenario | Taxed value | Yearly tax | Monthly in the payment |
|---|---|---|---|
| Seller's last bill (capped value $340,000, exemption on file) | $340,000 less exemption | $5,400 | $450 |
| Your first year, no exemption on file yet | $400,000 | $8,000 | $667 |
| Your first year, exemption filed | $400,000 less exemption | $6,600 | $550 |
A lender that escrows on the seller's $5,400 sets your payment about $100 a month too low, and the shortage shows up at the first review. The fix is to ask the lender, before closing, to base the escrow on the full price and the current rate, and to file your exemption the week you move in.
Protesting the value
The appraisal district mails a notice of value in the spring. If it looks too high, you can protest, usually by May 15 or 30 days after the notice, whichever is later. A successful protest lowers the bill, and the lender's next escrow review follows it.
Questions people ask
Why did my escrow payment go up so much in Texas?
Usually because the first year's escrow was based on the seller's tax bill, which carried their homestead exemption and years of the 10% cap, and your first bill was on the full purchase price with no exemption yet. The account came up short and the new estimate was higher. Filing your own homestead exemption and asking the lender to re-run the escrow after it posts are the fixes.
How much is the Texas homestead exemption?
The school-district part is set by the state: $140,000 since the 2025 tax year (raised from $100,000; voters approved it in November 2025), plus an extra $60,000 for people 65 or older or with disabilities. Check the Texas Comptroller or your appraisal district for the figure that applies to your tax year. Cities, counties and other units may add their own percentage.
When should I file for the homestead exemption after buying?
Right after closing. Your exemption usually starts on January 1 of the year after you buy; it covers part of the purchase year only if the seller did not have the same exemption that year. The 10% cap on your taxed value starts the year after your exemption is first in place.
Is the tax guess hiding what the lender is really charging?
Tell us the rate and Section A from your Loan Estimate. We set the escrow lines aside and check whether another lender beats the lender's own price. It is free, there is no credit pull, and nobody calls you. The free Loan Estimate checker reads your quote in your browser first; nothing you type leaves it.
Check my quoteTax rates, exemption amounts and deadlines are set by the Legislature, the Comptroller and local taxing units and change from year to year; the figures above are illustrative, not tax advice. Figures are illustrative and are not a loan offer, approval, commitment to lend, or Loan Estimate. Your actual rates and fees depend on qualification with lenders. comparemyloan does not negotiate with lenders, lock rates, or take loan applications. This page is general information, not legal or tax advice.