When house hunting in Dallas, one of the top questions that potential home buyers ask is, “What will my annual property tax be?” Understanding your expected Dallas property tax is essential when determining which homes are within your budget, as well as when comparing homes in different suburbs or neighborhoods. Unfortunately, calculating Dallas property tax rates is anything but straightforward. It all comes down to the old adage: location, location, location! Your location – within a county, city, school district, special district, community college district, or other district – can significantly impact your tax rate. Two homes may be just a mile apart but fall into completely different districts, leading to very different tax rates.
What is the Current Dallas Property Tax Rate?
As a general rule of thumb, depending on where you buy in the Dallas Metroplex, property tax rates fall between 1.97 percent and 3.43 percent of assessed home value.
In Dallas, the governing body (e.g., the City Council, School Board, or County Commissioners) of each taxing entity sets the rates for their jurisdiction. While the Dallas Central Appraisal District does not levy taxes, the district will provide a general estimate of taxes on each property. Special tax zones may also be present and add to your tax burden depending on the specific property. House hunters are advised to call their local tax office for the exact amounts. To get your total effective tax rate, multiply the combined local tax rates by your property assessment amount.
Property assessment may reflect market value of property use plus improvements, or may be higher. It is important to check the tax assessment and rate for the specific area. Don’t be misled by estimation websites! Estimated valuation does not equal government issued assessments. If you feel that the assessment on a property is unfair, there is a challenge process in place. However, this process is complex and time consuming.
Should I Expect Future Dallas Property Tax Rate Increases?
A b economy driven by more corporate relocations to the Dallas Metroplex has pushed home demand well beyond the existing supply. This means higher property values, which leads to a higher tax bill. At the same time, property tax rates are also increasing. Over the last decade (2005 to 2015), Dallas County property tax rates have steadily increased from 0.55 percent to 0.66 percent, a 20 percent increase. For homeowners, this means a big jump on their tax bills. In 2015, preliminary taxable value increases were as high as 19 percent in Addison, 10 percent in Park Cities, 9 percent in Grand Prairie, and 8.5 percent in Mesquite.
A significant increase in property values is contributing to calls for lower tax rates in major Texas cities including Dallas, Fort Worth, and Austin. In Austin, for example, some government officials have spoken out against combat future rate hikes. Last year in Dallas, Mayor Mike Rawllings called for property tax cuts, or at least a freeze on rate hikes.
When getting started in the Texas real estate market, realize that you will need to begin by making a few assumptions and get more specific over time. Assume that you will pay between 2 and 4.5% property tax. Depending on your exact location, you can aim for the lower end of the tax scale, but you will need to confirm your property’s exact jurisdiction with your real estate agent and local Appraisal District. To zero-in on an area, you can use estimation tools such as “Smart Asset” for a quick estimation of partial local tax rates within a zip code, but do not assume that this estimation will include all local, special, and other taxes.
Paying Property Taxes in Dallas: What Should New Texas Residents Expect?
When relocating to Texas, there’s good news and bad news on the tax front. First, the bad news: Texas, on a state-by-state basis, has the fifth highest property tax rate in the United States, according to a recent study by WalletHub. Now, the good news: Texas has no income tax and no vehicle property tax. Depending on your income, the lack of state income tax may help offset an increase in property taxes from your previous locale, and is an important factor when considering which homes are within your budget.
If property tax rate is a critical factor in determining your maximum property affordability, begin a consultation with a realtor. They can help you find locations with lower assessments and lower rates. Also, realtors can help you determine what school district to live in. If school choice is important to you, in general, better school district zones have higher school tax rates. Alternatively, if you do not have children, living in a district with lower school tax may benefit you.
How does Dallas Property Tax Compare with Other Major Cities?
Within Texas, the Dallas combined property tax rate is on par with other major cities. Fort Worth and Houston are both slightly higher (estimated rates are 2.321 percent and 2.259 percent respectively) and San Antonio and Austin are slightly lower (estimated rates are 2.097 percent and 1.973 percent).
Compared to other major metropolitan areas, however, Dallas is more expensive. Dallas outranks major U.S. cities including Chicago (2.009 percent), New York (1.925 percent), Atlanta (1.14 percent), Philadelphia (0.949 percent), Los Angeles (0.793), San Francisco (0.683 percent), and Washington, DC (0.572 percent). However, it’s worth noting that these cities are all in states with income tax, compared with Texas, which does not have one.
Dallas Property Taxes: What’s Next for 2016?
When comparing property tax rates within Dallas (or even between other cities), look for assessments, not valuations. Many websites give approximations for property valuations based on area. These are statistically based guesses. Assessments matter, valuations don’t. Your effective property tax amount owed will be based on the property assessment. From that assessment, depending on your exact location, county, city, school, community college, special, or other tax rates will apply. If you expect between a 1.8 to 4.5 percent combined property tax rate, assuming no deductions or exceptions, you can estimate the actual affordability of your new home.
2 Point Highlight
1- As a general rule of thumb, depending on where you buy in the Dallas Metroplex, property tax rates fall between 1.97 percent and 3.43 percent of assessed home value.
2- Texas, on a state-by-state basis, has the fifth highest property tax rate in the United States; however, Texas has no income tax and no vehicle property tax.
