Ch. 07 · Taxes
Texas property taxes for new builds: exemption, cap, and districts
No income tax, but property taxes carry the load. The $140,000 school exemption, the 10 percent annual cap, and what MUD and PID districts add to your monthly number.
Texas has no state income tax, and it pays for schools, roads, and districts through property taxes, so the bill on a new build is a first-class line item, not an afterthought. This chapter covers the two protections that matter, the homestead exemption and the 10 percent cap, and the two districts that add cost, MUD and PID.
The residence homestead exemption in 2026
Texas voters raised the school district homestead exemption to $100,000 in November 2023 (Proposition 4) and again to $140,000 in November 2025 (Proposition 13), so for the 2026 tax year the school tax exemption for an owner-occupied home is $140,000 of appraised value. The exemption applies to school district maintenance and operations taxes; county, city, and junior college exemptions may add on depending on where you live. You must apply, and the application deadline for the current tax year is generally April 30, so file as soon after closing as you can.
The 10 percent cap on appraised value
Once a property qualifies as a residence homestead, Texas law (Tax Code Section 23.23) caps the annual increase in its appraised value at 10 percent, even if the market jumps faster. Two new-build caveats: the cap does not apply to the value of new improvements, which is how a finished house can hit full value in year one (chapter 6), and the cap only kicks in for the first full tax year after the exemption is effective.
MUD and PID districts: what they add
Many North Texas new communities sit in districts that funded their own infrastructure. A Municipal Utility District (MUD) is a political subdivision that borrows to build water, sewer, drainage, and sometimes roads, and repays the debt with an ad valorem property tax on top of the base rate. MUD tax rates commonly run from about $0.25 to $1.50 per $100 of assessed value, with the newest districts at the high end. A Public Improvement District (PID) is created by a city or county to fund roads, landscaping, lighting, and entry features through a fixed assessment attached to the lot, commonly repaid over 20 to 30 years and typically running $100 to $250 a month. Both are disclosed in the builder's paperwork, and both should be modeled into your monthly cost before you sign.
Budgeting your true monthly number
Take the appraised value, add the MUD rate if there is one, add the PID assessment if there is one, and check whether the community has an HOA. Add the school, county, city, and any special district levies, then divide by 12. The number that survives that math is your real housing cost, and it is the number to compare against the builder's marketing payment, which rarely includes tax districts.
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.
Next in the process
Ready to buy before you move?
Book the consult. Then pick the area.
This guide is the process, not the listings. When you are ready to apply it to your specific move, book a consultation with Theresa De La Rosa, Broker at Covenant Heritage Realty. For the which-DFW-area-fits question, the community and city guides live at indfwliving.com.