When is a New Homeowner Liable for Property Tax in Texas?


When buying a new home in Texas, you will become responsible for any taxes not paid after the closing or unpaid taxes that preexist closing. Your title company will contact the county title office to determine exactly how much you and the seller will owe in property taxes upon closing. Here, we will look at who is expected to pay property taxes after a property is sold, together with an example of how property taxes are prorated.

Who Pays the Property Tax on a Home Sale in Texas?

Property taxes are typically paid in arrears for the full year, either by the owner or through an escrow account with their mortgage lender. Exactly who pays will depend on the sale’s closing date, the date taxes are due, and the sales agreement. For example, as an incentive to sell, you as the buyer may offer to pay the total property tax for the year. What is important is that before the closing date, paying property tax is the seller’s responsibility. But starting on the closing date, it is the buyer’s responsibility as the new owner to pay taxes should the buyer not want a tax lien to encumber the property.

Why Do You Need to Pre-Pay Property Tax When You Buy A House in Texas?

It is necessary to ensure that the taxes due on a property are covered at the time of the sale. This will often require a particular sum to be credited to the buyer. The exact division of liability between the buyer and the seller will then be calculated and typically prorated. Once the final bills come out, If you received an insufficient credit, you generally are reimbursed under typical contract terms. The same is true if the seller has overpaid. If there are any tax liens owing on the property, they need to be settled before the sale can be concluded.

It is the title company’s responsibility to check whether the property has any tax liens. When the sale closes, they can estimate how much tax you and the seller will owe. The person selling you the property will pay a prorated amount for the period before the sale.

Understanding the important property tax payment dates is essential to understanding this. Property values are appraised on January 1, and notifications are mailed between April and May. Tax bills are sent out on October 1, and payments are due on January 31 the following year.

Prorating the Property Taxes

Calculating who owes what when it comes to property tax liability can be challenging, but thankfully, this is typically the title company’s responsibility. It is still helpful to understand what is happening, as, ultimately, you are responsible for paying taxes after you take ownership of the property

Suppose you and the seller agree to prorate the real estate tax on the closing date. The closing date is September 16th, and the annual property tax due is $3600. Here are the steps to take to calculate your taxes owing:

  1. Divide the total tax due by 12 to get a monthly amount: $3600 / 12 = $300 per month
  2. Divide the monthly amount by 30 to get a daily amount: $300 / 30 = $10 per day
  3. The seller is responsible for 8 months and 15 days: (8 x $300) + (15 x $10) = $2550
  4. The buyer (you) is responsible for 3 months and 15 days: (3 x $300) + (15 x $10) = $1050

At closing the the buyer will receive a credit from the seller for the $2,550 in taxes the seller owed for their share of ownership within that year. Your realtor and the title company should be able to explain these to you when working out the sale agreement.


How Often Do You Pay Property Tax in Texas: Monthly or Yearly?

Texas property tax payments are due once per year, but you do have the option to make monthly payments in order to lessen the financial strain. While you only need to settle your property tax account once per year, some mortgage providers may require you to make monthly payments towards them every month through an escrow account. When the payment is due, they then pay the full tax amount on your behalf. Your first year’s taxes for your new home will most likely be included in your monthly mortgage payments.

For new construction homes, the first-year property tax assessment can be determined either by the sale price or by the cost approach. The latter is based on the replacement value of the house as well as the value of the land. Which could result in a lower appraisal. It is important to note that the appraisal value of your home can change from year to year.

Why Could I Owe More Taxes the Following Year?

Sometimes, new owners get a sudden increase in property taxes the following year after purchasing the property. This increase could be due to the previous property owners qualifying for tax exemptions such as age or veteran status or other homestead exemptions, which you do not, and the prorated taxes were calculated based on these values and deductions. It’s important that when purchasing a property, you as taxpayers make sure your realtor gives you an accurate estimate of your annual property tax based on your exemptions should you qualify.

For example, let’s say you purchase a property, and the seller qualifies for exemptions because they are over the age of 65. The title company will look at what is owed on the tax account and factor only that amount into the calculations. That is technically correct for the current tax bill, but it does not necessarily reflect the taxes that will be levied on the property once you take possession of it. You may not qualify for any exemptions, so you will be charged at the full rate. You will have a certain expectation after seeing the bill that was raised at the time of the sale, so the next year’s taxes will come as a shock.

To avoid that unwelcome surprise, your realtor or lawyer should inform you of the differences between the rates on the seller’s account, and those you are set to face once the property is transferred to you. It is a good idea to be proactive and ask whether there are any exemptions currently applied to the property that will then fall away when you become the registered owner.

For homeowners in Texas, staying informed about property tax basics is important. These taxes, calculated on the basis of property values and local rates, are integral to responsible homeownership. It is critical to be aware of key deadlines, like the annual due date, and to know whether you qualify for any exemptions. This knowledge can significantly impact your tax balance. Failing to keep up with deadlines could lead to late payment, which would then incur penalties and interest. If you qualify for an exemption but are unaware of it, you will pay more than you should. Proactively managing property tax obligations and keeping up to date on potential rate changes, ensures compliance and avoids late payment penalties. Homeowners are encouraged to consult local tax authorities for specific guidance and information.

It is important to remember that the practices outlined here represent the standard way of paying taxes and dividing tax liabilities in relation to property sales in Texas. The process may be different for your purchase if you negotiate different terms. It all depends on the contract. You might get the seller to agree to settle all taxes, or you might commit to taking on that burden as part of your offer to purchase. As long as the taxes are paid, the county doesn’t mind who pays them. Keep this in mind when you speak to your realtor.

We Provide a Solution for Property Owners Owing Property Tax in Texas

Founded in 1946, American Finance & Investment Co., Inc. (AFIC) started by serving the financial needs of El Paso and has since grown to become one of the top property tax lenders in the state of Texas, with a complaint-free track record for over 65 years, with the Better Business Bureau. It has been run by the same family - the Eisenbergs - for three generations. As a family business, we understand the needs and concerns of families, and the importance of property and financial management to any family’s well-being. This focus has driven AFIC’s business philosophy since its founding.

We offer our clients an affordable, hassle-free way to ensure that your account with the local government tax office is paid in full and will work out a manageable repayment plan for you. AFIC can provide you with an instant quote by completing the form on our homepage. For qualifying properties, we can help you pay off your delinquent taxes and offer you the following benefits:

  • Quick and completely online process
  • No money down
  • No credit check
  • Free 30-day rate match
  • Match competitors and beat their rate by 1%
  • Avoid high penalties and foreclosure

We pride ourselves on finding solutions to suit the unique needs of our clients. If you would like to discuss our property tax loans, please contact our experienced team at AFIC today.

Ernest Eisenberg

Ernest Eisenberg, President of American Finance & Investment Co., Inc. (AFIC), brings a wealth of expertise in non-traditional financing, including property tax loans and non-bank mortgage solutions. His vision is characterized by a commitment to offering flexible financing solutions to Texas property owners.

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