Tips to Avoid Property Tax Surprises on Newly Built Homes

February 19, 2026 | by Michael Wilt

Categories: First Time Buyer, Homeownership

Thinking of buying a newly built home as a first-time home buyer? First, congrats on taking the leap into homeownership! Second, we're here to take some of the mystery out of what to expect when it comes to your mortgage payment -- particularly your property taxes. 

the mortgage payment

There are typically four elements to a mortgage payment, commonly referred to as "PITI," which stands for principal, interest, taxes and insurance. A portion of your payment will pay the prinicipal, which is the equity you are building in the house, and a portion will pay for interest. The taxes and insurance, however, are paid through your escrow account. 

If you're unfamiliar with an escrow account, think of it as a savings account for your house. Every month, you make a payment towards your escrow account as part of your overall mortgage payment, and your mortgage loan servicer will hold on to those funds and then pay your property taxes and insurance on your behalf with funds from your escrow account. That way, you're not respopnsible for setting aside funds to pay those on your own. 

property tax considerations

If you're buying an existing home, your property taxes should be pretty predictable based on the appraised value of the home. However, if you're purchasing a newly built home, you might be in for a property tax surprise after you've been in the home for a year. We'll explain why below.

Your property taxes are based on the value of your land plus the value of improvements (typically, just your home). However, when the tax appraising district assesses the value of new construction, it's based initially on just the value of the land, as the improvements weren't built when it was assessed. 

Here's an example. Let's assume that your land is appraised at $75,000. When you purchase a newly built home, you will commonly just pay taxes on the value of the land in the first year. Now, let's assume that you purchased a $300,000 home. At your next appraisal, you're likely to see an appraisal that's close to that $300,000 purchase price. 

With that new appraisal comes a property tax burden that's signifcantly higher, as your property value just quadrupled thanks to a home being built on the land. Given that Texas has some of the highest property taxes in the country, you might experience some sticker shock when you see your property tax bill in year two. 

property tax tips

There are ways you can be prepared for that surprise and also reduce your overall tax burden. Here are some tips.

• See if you qualify for any property tax exemptions and know when you need to file them. The most common is a primary homestead exemption which has to be filed by April 30th in Texas. Examples of other exemptions include having a disability, being over the age of 65, being a disabled veteran, etc.
• When searching for homes, know which taxing jurisdictions assess property taxes there. Sometimes it's only the county, city, and school district. But oftentimes, there can be community colleges, health districts, and other special districts that assess taxes.
• Familiarize yourself with your escrow account and how much is in it. If you're worried your mortgage servicer isn't setting aside enough to cover future property taxes, you can request a new escrow analysis or simply put more into escrow in anticipation of higher taxes.  
• Contest your appraised value. The most effective way to reduce your taxes is to reduce the assessed value of your home. If you feel like the appraisal district over-valued your home, you can contest it. In Texas, the due date for contesting is usually May 15th or 30 days after you've received notice of your appraised value. 

If you're interested in other tips to reduce your overall mortgage payment, we encourage you to listen to a recent On the House podcast on mortgage interest hacks. 

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On the House blog posts are meant to provide general information on various housing-related issues, research and programs. We are not liable for any errors or inaccuracies in the information provided by blog sources. Furthermore, this blog is not legal advice and should not be used as a substitute for legal advice from a licensed professional attorney.