A Simple Guide to Houston’s Property Taxes for Sellers

If you're thinking about selling your home in Houston, property taxes are something you’ll need to understand.

While taxes can feel a bit overwhelming (so this blog might be a little boring), they play a very important role to determine the value of your home, what buyers will consider, and how much you need to plan for when closing the sale. 

Here’s a simple guide to Houston’s property taxes for sellers to make the process clearer.

How Are Property Taxes Calculated?

Property taxes in Houston are based on the value of your property and the tax rate set by local taxing authorities. Your property’s assessed value is determined by the Harris County Appraisal District (HCAD) or other local county appraisal districts if you’re outside Harris County.

Here’s a quick formula to keep in mind:

Property Tax = Assessed Value of Property × Tax Rate

For example, if your home is assessed at $300,000 and the combined tax rate for your area is 2.5%, your annual property tax would be:

$300,000 × 2.5% = $7,500 per year.

What Are the Tax Rates in Houston?

Houston’s property tax rates vary based on the location of your home. Different areas may be taxed by a combination of entities, including:

• The city of Houston
• School districts
• County taxes (Harris, Fort Bend, Montgomery, etc.)
• Municipal Utility Districts (MUDs)
  

The overall property tax rate can range from 2.2% to 3.5%, depending on where your property is located.

Homes in the city itself may have slightly lower tax rates, while homes in suburban areas like Katy or The Woodlands, or other areas with top district schools, might have additional taxes for things like schools and infrastructure.

What Happens When You Sell Your Home?

When selling a home, property taxes are typically prorated between the seller and buyer. This means you’ll only pay taxes for the portion of the year you owned the home, and the buyer will cover the rest.

Let’s say you close the sale on July 1st. You, as the seller, will be responsible for paying property taxes from January 1st to July 1st. The buyer will take over from July 1st to December 31st.

The taxes are usually paid at the closing, and the title company or real estate agent will handle the calculations for you, making sure everything is divided fairly.

Are There Any Exemptions?

Homestead Exemption: If you’ve lived in your home as your primary residence, you’re likely eligible for a homestead exemption, which reduces the taxable value of your property.

For instance, if your home is valued at $300,000 and you qualify for a $25,000 homestead exemption, you’ll only pay taxes on $275,000.

Over 65 or Disabled Exemptions: Senior citizens and individuals with disabilities may qualify for additional exemptions, further reducing property tax liability.

If you’re already using these exemptions, they will apply for the time you’ve owned the home during the tax year. However, once you sell, the buyer will need to apply for their own exemptions.

Can Property Taxes Impact the Sale Price?

Absolutely! Higher property taxes can affect how much a buyer is willing to pay for your home. Buyers consider not just the purchase price but also the ongoing costs of owning the property, which include property taxes.

For example, if your home is in an area with a 3.2% tax rate, a buyer might find it less affordable compared to a similar home in an area with a 2.5% tax rate. Buyers often ask about annual property tax amounts when deciding on an offer, so it’s helpful to have this information ready.

Property Tax Appeals and Protests

If you believe your home’s assessed value is too high, you have the right to protest the assessment. This can potentially lower your property tax bill, making your home more appealing to buyers.

Property tax appeals must typically be filed by May 15th of the tax year. The process involves providing evidence that your home’s value is lower than the assessed amount, such as recent sales of comparable properties in your area.

If your protest is successful, it could mean a lower tax bill for the current year, which could help make your home more marketable.

Closing Costs and Property Taxes

When selling your home, property taxes are just one part of your closing costs. Other costs can include:

• Title insurance
• Agent commissions
• Transfer taxes
  

While property taxes can seem like a large chunk, they’re just one piece of the overall closing process.

Finding a professional and low-cost commission real estate agent will help you lower your closing costs, which can allow you to close the deal much easier. 

Final Thoughts

Remember, if you’re unsure about anything related to property taxes, don’t hesitate to ask your real estate agent or a tax professional for guidance. That way, you can sell your home smoothly and confidently, knowing exactly where your property tax obligations stand!