Property Taxes On A New Home
The property taxes on a new home play a major role in determine a budget. See below for information on how the property taxes will be calculated, what exemptions may exist, and how the existing exemptions may save you some money.
Central Appraisal Districts (CAD)
The Central Apprasial Districts is responsible for assessing the value of a home for tax purposes. The CAD websites are helpful tools to research estimated property taxes along with other information about a home. The CAD websites provide the county’s value assessment for a home, and while this may not be indicative of the true value of the home, it is what the basis for property tax calculations. See the “Helpful Links and Tax Calculator” section at the bottom of this page for the most common counties in the North Texas area.
Property Tax Calculations
When you purchase a home the Central Appraisal Districts are in charge of assessing the home’s value (which thereby determines the property taxes). Property taxes are calculated by multiplying the CAD’s assessed value times the tax rate. In the North Texas area tax rates typically range from 2.1% to 2.6%; we typically use 2.3% to 2.5% for rough estimates. For example, a $400,000 valued home with a 2.5% tax rate has a $6,000 per year tax obligation, or $500 per month. ($400,000 x .025 = $6,000). Check out our Helpful Links below that include property tax calculators so you can estimate the taxes due.
Tax Value vs. Appraised Value
You tax value is determine by the Central Appraisal Districts and will most likely be based of the home’s sale price after the first year. The lenders do NOT share your appraisal with the CADs; however, you are welcome to provide them the appraisal if you would like to Contest Your Property Value and save money by reducing it’s valuation for tax purposes. Note: if the home you buy has had a cap in place for several years, be aware that the value of the home, and the taxes, may increase substantially in the year following the year you purchase it.
Property Taxes At Closing
When you sell or buy a home the property taxes will be prorated at closing so that each party pays their portion of the year’s taxes. The prorated taxes will typically be based off an estimated tax amount (unless the tax bill is due which only occurs for closings in October through December 31st). The estimated taxes are calculated based of the previous year’s tax bill.
Reconciling Taxes Paid and Credited
Because the prorated taxes at closing are based of an estimated tax amount (derived from the previous year’s tax bill), the buyer and sellers can technically require the other party to reconcile the difference once the actual tax amount is known at year-end. That said, the vast majority of the time neither party follows through with this because the difference is typically a nominal amount and most folks don’t want to waste the time tracking down and hassling a stranger for a few bucks.
Buying A Home With An Existing Homestead Exemption
If you buy a home with an existing homestead exemption then you are the benefactor of that exemption for the remainder of the year – even if you won’t be occupying the home as your primary residence. However, that exemption will expire at the end of that year and you will have to File Your Homestead Exemption after January 1st the following year.
Buying A Home With An Existing Over 65 Exemption
The rules are different if you buy a home that has an existing over-65 or disability exemption. Whether the over-65 or disability exemption stays in place depends on whether the person who qualified for that exemption transfers it to a different homestead during the same year.
- If the over-65 or disabled person does not establish a homestead exemption on a different homestead, the exemption stays in place for the entire year.
- If the over-65 or disabled person does establish a homestead exemption on a different homestead, then when the tax assessor calculates taxes on the sold home for the year, the assessor will prorate the taxes to reflect the over-65 exemption or disability for only the portion of the year that the over-65 or disabled person owned it.
If you qualify for the over-65 or disability exemption then you can place those exemptions on the property immediately to avoid any changes in the taxes.