As a property owner in Texas, you are subject to ad valorem property taxes. This means that the value of your property is assessed annually by local taxing units (such as counties and cities), and you pay taxes on that assessed value. This article explains which local taxing units can tax your property and how those taxes are calculated.
A “taxing unit” is any governmental entity in Texas that can impose ad valorem property taxes, such as a county, city, school district, or special-purpose district or authority (such as a water district or hospital district).
A taxing unit typically assesses your property value and bases its tax rate on this assessed value. However, some taxing units have other ways to determine your property’s tax rate.
In addition to the county, most property owners living within the boundaries of incorporated cities and towns pay property taxes to those municipalities. The city tax rate is applied to your home’s taxable value, while the county tax rate is applied to the taxable value plus any city taxes. The total amount collected from both entities can be quite substantial.
The difference between city and county tax rates may be relatively small for some properties; however, when you consider that each taxing unit levies its own separate tax rate on every dollar in assessed value of your home or business property, it makes sense that there may be a disparity between the two rates.
Education districts are created by the state legislature and funded through property taxes. The district’s governing body is called a school board and is responsible for maintaining public schools within its jurisdiction. It’s possible that more than one school district could cover your property.
Special-purpose districts are created by Texas law to provide a specific service. They have their own governing bodies and tax base. The municipal utility district (MUD) provides water and wastewater services to a defined area. Other examples include hospital districts, drainage districts, and fire protection districts.
Like school districts or cities with home rule charters, special-purpose districts can exercise powers not granted to other types of entities (like county governments).
Municipal utility districts (“MUDs”) are created by a petition signed by at least 51% of the property owners in the proposed district. In Texas, MUDs are designed to serve a specific purpose, such as constructing a water or wastewater system.
The creation of MUDs is governed by Chapter 49 of the Texas Local Government Code (the “Code”).
An Independent School District (ISD) is a local taxing unit that provides funding for public schools. There are about 1,200 ISDs in Texas.
While an ISD does not replace the function of a school district (you can still choose to send your child to a private school), it does provide education options for residents within its boundaries.
An ISD offers students transportation, health care, and extracurricular activities such as athletics and band. These programs ensure that every student has equal access to quality public education to pursue their educational goals after graduation.
When you pay property taxes toward an ISD, you’re contributing toward the cost of providing these services for children in your area. Therefore, these funds are non-negotiable with other agencies like the county or city government where you live! One way this money gets used up is through maintenance costs associated with facilities: things like roof repairs or replacement computers if they break down unexpectedly (which happens). Another big expense area is transportation, i.e., buses for children.
Your property may be subject to taxes from more than one local taxing unit. Each local taxing unit imposes its tax rate, which is used to fund public services such as roads, schools, and police departments. This means that it’s essential for property owners to understand what properties are being taxed by each local taxing unit.
Understanding the local taxing units that collect tax on your property is critical. The city typically collects property taxes if you live in an incorporated city or town. You may also pay taxes to schools and special-purpose districts. The county collects taxes from residents outside city limits.
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