What Difference Do Property Taxes Make?

Dated: 05/05/2020

Views: 1143

Property taxes in Texas are the 6th highest in the nation and that will affect how much home you can afford to buy. Texas Property Taxes are confusing and the way you calculate them make it just about impossible to predict how much you’ll pay year after year. I’m going to do a simple explanation of how they’re calculated and why you should pay attention to the tax rate when you go to buy your next house.

Property tax amounts are a percentage of your home’s value and are made up of a combined city, county and school district rate. Every year any one or more of those rates could change, along with the assessed value of your home. You get a notice in the mail every spring letting you know what the changes are and shortly thereafter you’ll see the changes in your mortgage payment.

I work in the Dallas area and I cover all the surrounding suburbs. When people contact me to help them buy a house they usually tell me which areas they’re interested in based on where they want their kids to go to school, where their extended family lives or maybe where they work. There are a lot of reasons to pick a neighborhood but the tax rate is not at the top of this list for many home buyers. So why should you care?

Because property taxes can and do affect your home shopping budget and here’s how.

For this example I’m going to use the Richardson school district because my kids go there and I’m very familiar with it. It’s a very popular request from home buyers who need quick access to Dallas for work but also want great public schools.

There are four cities and two counties that feed into Richardson ISD, each with their own tax rates. Depending on which city and county your home is in, you’ll pay a different amount. Here’s the breakdown of the four cities in this example.

By calculating the tax rate percentage for each home in the four different locations, using a value of $400,000, you can see the monthly property tax payment for a home in Richardson is about $50 a month less than a home in Dallas or Garland. And the few homes in Plano that are zoned for Richardson ISD will save you more than $200 a month in taxes.

So speaking of Plano, let’s look at Plano ISD for a minute – it’s adjacent to Richardson, just north, and also has a great school district. The Plano school district covers a lot more ground and has 10 different cities and two different counties that feed into it. There is a part of Dallas that feeds into Plano schools and part of it is in Collin County and another part is in Dallas County. That is incredibly confusing and it’s the perfect example of why you should look at the tax rate for every house you’re considering.

Out of the ten cities zoned for Plano ISD, there ae four major ones. Let’s take a look at these areas.

This exercise shows that you can save $239 on your monthly mortgage and over $2800 a year on your taxes over the life of your loan if you buy in Collin County vs Dallas County. That’s a significant amount of money and depending on your credit score, interest rate and a few other factors you could spend $50,000-$60,000 more on your house building equity if you buy a house with one of the lower tax rates.

There are many circumstances that could justify you wanting to buy a house in an area with higher property taxes. I’m not suggesting you should never buy a home in Dallas County or any one of the locations with a higher property tax. But I am suggesting you take all this into consideration when choosing a location -- and most importantly when determining your budget. You need to leave room in your budget for your monthly payment to go up over the years. If you do that it won’t matter where you live or what your rate is, you’ll be prepared for the increase.

If you have questions about this please feel free to reach out to me. I’m happy to consult with you on this and help you decide what location is best for you to live based on your needs and budget.

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Danna Flemons

After graduating college, Danna worked for over 15 years in the advertising and marketing industry helping companies brand themselves and stand out from their competition. Danna's professional backgro....

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