How Do Property Taxes Affect Your Austin Home Sale?

by Amanda Zito

How do property taxes work when you sell a home in Austin, Texas?

Texas property taxes are paid in arrears. That means when you sell, you will usually give the buyer a credit at closing for your share of the year's property taxes from January 1 through the closing date.

You normally don't write a separate check. The amount is handled right on your closing statement.

This is one of those costs sellers don't always think about until they see their estimated proceeds.

And there is another part that matters when pricing your home.

Your current tax bill may look very different from what your buyer could pay after they purchase the home.

If you're selling in Austin, Lakeway, Bee Cave, or elsewhere around the Lake Travis area, here's what you should know.

Texas Property Taxes Are Paid in Arrears

Texas property taxes work a little differently than many sellers expect.

The person who owns the property on January 1 is responsible for that year's taxes, but the actual tax bill doesn't usually arrive until later in the year.

In Travis County, tax statements are generally sent around October 1, and taxes are due by January 31 of the following year.

So let's say you sell your home in May.

You owned the property for several months of that tax year, but you haven't received a bill yet.

You still need to cover your share.

That's where the property tax proration comes in.

Also, keep in mind that the Travis Central Appraisal District, or TCAD, determines your property's taxable value.

The Travis County Tax Office is the agency that actually collects the taxes.

If your home is in Williamson or Hays County, the process is similar, but you'll work with that county's appraisal district and tax office.

What Does a Property Tax Credit Look Like?

Here's a simple example.

Let's say your annual property taxes are about $12,000, and you close on June 30.

You've owned the home for roughly half of the year.

Your share may be around $5,950.

That amount is normally credited to the buyer at closing and comes out of your proceeds.

The buyer then pays the full tax bill when it becomes due.

You aren't handing the buyer a check. It's all handled through escrow and shown on the closing statement.

But it is still real money coming out of your proceeds, so it should be included when you're estimating what you'll walk away with.

And generally, the later in the year you sell, the larger that tax proration can be.

How Tax Prorations Work in a Texas Real Estate Contract

Most resale transactions in the Austin area use the TREC One to Four Family Residential Contract.

Property taxes are prorated through the closing date.

If the current year's tax bill isn't available yet, the title company may use the previous year's taxes to estimate the amount.

That means the number on your closing statement may not be the final number.

Once the actual tax bill comes out, the buyer and seller may need to make an adjustment if the final taxes are different from what was estimated.

That requirement can continue even after the sale has closed.

Why Could the Amount Change After Closing?

One reason is that property values can change.

If the previous year's bill was used to estimate your taxes and the new bill comes in higher, the original estimate may have been too low.

The buyer could then ask you to pay the difference for the portion of the year when you owned the home.

It can work the other way too if the actual taxes are lower.

This is also why your exemptions and tax protests can matter.

They can affect the final tax bill and, in turn, your share of the taxes.

Selling Between October and January Can Look Different

The timing of your closing matters.

Once the current year's tax statements are available, the title company is dealing with an actual bill instead of an estimate.

If you close in November or December, the title company may collect the taxes at closing and divide the amount between you and the buyer.

If you've already paid the full year's taxes, it may work the opposite way.

The buyer may reimburse you for the portion of the year after they take ownership.

This is something I recommend asking your title company about early so you know how the taxes will be handled before closing day.

Don't Forget About Your Mortgage Escrow Account

If your lender collects money for property taxes through your monthly mortgage payment, you may also have money sitting in an escrow account.

Your lender and title company should make sure the same tax bill isn't paid twice.

Once your mortgage is paid off, any remaining money in your escrow account is generally returned to you.

Watch for that refund after closing.

It's your money.

What Happens to Your Homestead Exemption When You Sell?

If the home is your primary residence, you may have a homestead exemption.

That exemption can lower your taxable value and your property tax bill.

In the year you sell, the exemption generally remains on the property for that tax year.

That means the buyer may benefit from your exemption for the rest of the year.

But your exemption does not permanently transfer to the buyer.

The buyer will need to apply for their own homestead exemption if they qualify.

There's another important piece sellers should understand.

Texas homestead properties can have limits on how quickly their taxable value increases.

If you've owned your Austin-area home for many years, your taxable value may be much lower than today's market value.

Once the home sells, the new owner's taxable value may eventually reset closer to market value.

That's why your tax bill may not be a good estimate of what your buyer will pay in the future.

Your Buyer's Future Tax Bill Can Matter to Your Sale

This is the part sellers sometimes overlook.

A buyer doesn't care only about the purchase price.

They're looking at the full monthly payment.

That includes:

Principal and interest
Property taxes
Homeowners insurance
HOA dues, if applicable
Other special district taxes or fees

If your home currently has a low taxable value because you've owned it for a long time, your buyer's estimated tax bill could be much higher than yours.

For example, someone who bought a Lakeway home ten years ago may have a very different tax bill than someone purchasing that same home today.

Buyers and lenders look at those numbers.

Higher taxes can mean a higher monthly payment, which can affect what a buyer can comfortably afford.

That's why I like to look at the buyer's estimated tax picture when we're talking about pricing.

Not just the seller's current bill.

Your listing should also make it clear when your current taxes reflect exemptions so buyers understand that their future taxes may be different.

What About MUDs, PIDs, and Other Special Districts?

Your total tax rate depends on all of the taxing districts connected to your property.

Depending on where you live, that could include:

The county
A city
A school district
An emergency services district
A Municipal Utility District, or MUD
A Public Improvement District, or PID

This matters because two homes with the same sale price can have very different property tax bills.

If your home is located in a MUD or another special taxing district, there may also be additional disclosure requirements when you sell.

Your agent and title company should confirm which districts apply to your property before the home goes on the market.

A Few Special Situations Sellers Should Know About

If You're 65 or Older or Have a Disability Exemption

Certain homeowners who are 65 or older or who qualify for a disability exemption may have additional property tax protections.

If you sell and buy another home in Texas, you may be able to transfer part of your school district tax ceiling to the new property.

There are specific forms and requirements, so this is something worth checking before buying your next home.

If You've Deferred Your Property Taxes

Some qualifying homeowners can defer paying certain property taxes.

But deferred taxes don't disappear.

If you sell the property, those taxes and any applicable interest may become due and can be paid from your proceeds at closing.

If this applies to you, get the payoff amount early so we can build it into your estimated net proceeds.

If Your Property Has an Agricultural or Wildlife Valuation

Some larger properties around the Austin area receive agricultural or wildlife valuations.

Those properties may be taxed based on their qualifying use rather than their full market value.

If the use changes, rollback taxes could become an issue.

The TREC contract addresses who may be responsible depending on when the change happens and who causes it.

If you're selling acreage with an agricultural or wildlife valuation, this is one of those situations where I recommend getting your title company and, when needed, a real estate attorney involved early.

If You're Behind on Property Taxes

You can still sell a home if you owe past-due property taxes.

But those taxes, along with applicable penalties and interest, will normally need to be paid from your proceeds at closing.

The title company will confirm what is owed.

If you already know you're behind, tell your agent early.

That way we can include it in your net sheet and avoid a surprise at closing.

Moving From California? Texas Property Taxes Work Differently

This comes up often with people moving between California and Texas.

California uses a July-through-June property tax year with two main installments.

Texas uses the calendar year and generally bills property taxes in arrears.

Because of that, California sellers may be used to receiving a credit at closing because some taxes were already paid.

In Texas, sellers will often be giving the buyer a tax credit instead.

Unless you've already paid the full tax bill for the year.

It's not better or worse. It's just a different system, and it's important to include it when estimating your proceeds.

What Should You Do Before Listing?

Before putting your home on the market, I recommend a few simple steps.

Pull your latest property tax statement and confirm what exemptions you currently have.

Ask your title company how tax prorations are likely to be handled based on your expected closing date.

Then make sure the estimated property taxes are included in your seller net sheet.

And when you're deciding on a listing price, don't look only at what you currently pay in taxes.

Look at what a buyer may be paying too.

That monthly payment can affect how buyers view your price and what they can afford.

This information is general and isn't meant to replace tax or legal advice.

Every property is different, and your county, exemptions, tax districts, and closing date can all change the numbers.

For questions about your specific tax situation, your title company, appraisal district, tax office, or tax professional can help confirm the details.

Frequently Asked Questions

Do I Pay Property Taxes When I Sell My House in Texas?

Usually, yes.

Your share of the year's taxes is normally handled as a credit to the buyer at closing.

You typically cover the taxes from January 1 through your closing date.

If you've already paid the full year's property taxes, the buyer may reimburse you for their portion instead.

Does My Homestead Exemption Transfer to the Buyer?

No.

Your exemption may continue to affect the property's taxes during the year you sell, but the buyer will need to apply for their own exemption if they qualify.

Their future taxable value may also be different from yours.

Why Would a Buyer Contact Me About Taxes After Closing?

If the title company had to estimate the year's property taxes at closing, the final bill may be different.

The TREC contract allows for adjustments when the actual tax amount becomes available.

If the final taxes are higher or lower than the estimate, the buyer and seller may need to settle the difference based on their share of the year.

Thinking About Selling in Austin or the Lake Travis Area?

Property taxes usually aren't the first thing sellers think about when preparing to sell.

But they can affect your closing costs, your estimated proceeds, and even how buyers look at the monthly cost of owning your home.

My background includes finance and tax before real estate, so I like to look at these numbers early instead of waiting until we're already in escrow.

If you're thinking about selling in Austin, Lakeway, Bee Cave, Hudson Bend, or the Lake Travis area, we can go through your property taxes, estimated selling costs, and pricing strategy before you put the home on the market.

That way you have a clearer idea of what the numbers may look like before you make your next move.