Ch. 06 · Taxes
The January 1 tax assessment trap
Texas appraises property as of January 1. Under construction that day? You pay on the percentage complete. Finished that day? Full value, immediately. Here is how to plan for both.
Texas appraises every property as of January 1, based on its condition on that date. If your new home is still under construction on January 1, you still owe tax, on the percentage of the home that is complete. If it is finished by January 1, the full value hits the roll immediately. This is the trap that makes first-year tax bills on new builds look either suspiciously small or shockingly large.
The January 1 appraisal date
Texas Tax Code Section 23.01 requires appraisal districts to appraise property at market value as of January 1 of each tax year, based on the property's condition on that date, not on when you close or move in. The tax lien date and the appraisal date are the same day: January 1.
Under construction on January 1: percentage of completion
If the home is under construction on January 1, the improvement is assessed at its percentage of completion as of that date under Tax Code Section 23.215, with the land valued separately. A home that would be worth $450,000 finished and is 40 percent complete would carry roughly $180,000 of improvement value on the roll, plus the land. Many buyers close mid-year expecting small taxes, and they are right for year one, precisely because the January 1 snapshot caught framing rather than a finished house.
Finished by January 1: the full bill lands immediately
A home that is complete on January 1 is assessed at full market value even if nobody has lived in it. The homestead cap does not soften that first year: finishing a house counts as a new improvement, so the full value applies, and the 10 percent annual cap on homestead appraisals (chapter 7) only begins to protect you the following year, once the exemption is in place.
What to do about it
Ask your agent or title team how taxes will be prorated at closing; in Texas the year's taxes are typically split between the builder and the buyer for the portion of the year each owned the property. After closing, file for the homestead exemption with the appraisal district promptly, so the cap and exemption start applying as early as the law allows. And budget for the first full-value tax year, because that is the bill that surprises people.
Sources
Material factual claims in this chapter link to the sources below. Market figures are reported conditions, not guarantees; verify current offers in writing.
Written by
Theresa De La Rosa
Broker, Covenant Heritage Realty, LLC · TX #807294 · 18+ years in Texas and Florida real estate.
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