In Texas, property taxes are billed in arrears for the calendar year, and when a home changes hands, the buyer and sellers split that year's taxes at closing through a prorated credit — the seller covers their months of ownership, the buyer covers theirs, and the buyer takes over the full bill once it's actually issued that fall. What each party owes going forward depends on the property's assessed value, which exemptions apply (particularly the homestead exemption), and the rates set by each taxing entity with authority over the property — not on what the previous owner happened to pay.
That last part is worth sitting with, because it's the question that comes up in almost every transaction we work on: a buyer looks at the seller's current tax bills, sees a number, and assumes that's roughly what they'll owe once the home is theirs. Sometimes it's close. Often it isn't and the gap can catch new homeowners off guard the following year if nobody walked them through why. For homeowners and buyers in Montgomery County, understanding how local property taxes work is an important part of evaluating a home's overall cost.
It's also a timely question locally. Montgomery County Commissioners Court just approved a higher county tax rate for the 2026-2027 fiscal year, which is a good prompt to look at how these bills actually work and why one taxing entity's rate change doesn't tell the whole story for any given property.
Did Montgomery County Property Taxes Increase in 2026?
Yes — for the county's portion of the bill. Montgomery County Commissioners Court approved the FY 2026-27 budget in a 3-2 vote on September 8, setting the county's property tax rate at $0.3860 per $100 of taxable value, up from $0.3770 the prior year. The roughly $546 million budget included pay increases for county employees, among other items. According to the county's own taxpayer impact statement, the increase works out to just over $30 more per year — a few dollars a month — for a median-valued homestead, based specifically on the county's share of the bill.
The last point is the one worth sitting with: this is a county rate increase, not a total-bill increase. A Montgomery County property is typically taxed by several separate units; the county, a school district, possibly a city, and in many neighborhoods a Municipal Utility District (MUD) or similar special district and each one sets, votes on, and adjusts its own rate independently. The county raising its rate says nothing about what the school district, city, or MUD serving a particular property did with theirs this year.
A useful local example: the City of Montgomery went through its own FY 2026-27 budget process this year and kept its property tax rate flat at $0.40 per $100 valuation — the same rate it's held for several years — even as the county's rate moved up. Two different governing bodies, two different decisions, same tax year. That's the pattern to expect across the county: no single vote determines what any one property's total bill will do.
So while it's accurate to say Montgomery County's rate went up in 2026, it would be a mistake to assume every property tax bill in the county rose by a proportional amount or rose at all, once exemptions, appraisal caps, and the actual mix of taxing entities on a given property are factored in.
How Are Texas Property Taxes Calculated?
Texas has no state income tax, which means property taxes carry a heavier share of the load for schools, counties, cities, and special districts than in many other states. Each January 1, the county appraisal district, in this area— the Montgomery Central Appraisal District (MCAD) — assesses every property at its market value as of that date. That appraised value is the starting point.
From there, taxable value is reduced by whatever exemptions apply — most commonly the homestead exemption for an owner-occupied primary residence. Each taxing entity with authority over the property then applies its own rate to that taxable value, and all of those amounts combine into the total bill. As the county rate change illustrates, this is why two homes with similar market values can carry noticeably different total tax bills: it depends entirely on which entities have jurisdiction over each one.
A couple of things matter most here for Montgomery County specifically:
- The homestead exemption. For 2026, Texas school districts must exempt $140,000 of a qualifying residence homestead's value from school district taxation. Homeowners age 65 or older or with a qualifying disability may receive an additional $60,000 school district exemption, along with a school property tax ceiling. Other exemptions may apply depending on the homeowner and taxing entity.
- The 10% appraisal cap. Once a home qualifies for the homestead appraisal cap, its appraised value generally cannot increase by more than 10% annually, plus the value of any qualifying new improvements, even if its market value rises more sharply. This limitation applies to the appraised value used for taxation, not the property's market value.
What Happens to Property Taxes When a Home Is Sold?
Texas property taxes are billed in arrears. The bill covering a given year isn't issued until October or November of that year, and isn't due until January 31 of the following year. That timing matters because most closings happen before the current year's bill even exists.
When a home sells mid-year, buyer and seller share responsibility for that year's taxes based on how long each of them owned the property. The seller is generally responsible for their share of the year's property taxes through closing, while the buyer assumes responsibility for the remaining portion of the year. These amounts are typically reconciled through tax prorations at closing.
One detail worth knowing: homestead exemptions can affect how property taxes are estimated at closing. Depending on the circumstances, the seller's existing exemption may affect the current year's tax calculation, while the buyer may qualify for their own exemption after purchasing the property. Because exemption eligibility and timing can affect the final tax amount, buyers and sellers should confirm the property's current exemption status with MCAD rather than assuming the seller's exemption will remain in place for the rest of the year.
How Are Taxes Handled at Closing?
Since the actual bill usually doesn't exist yet at closing, the title company estimates it and prorates the amount between buyer and seller based on the closing date:
- Closing before roughly April 1 (before updated appraisal notices are generally issues): The prior year's tax amount may be used as the basis for estimating property taxes.
- Closing after updated appraisal values become available but before tax bills are issued in the fall: The estimate may be based on the property's current appraised or taxable value, applicable exemptions, and available tax rates, which may include the prior year's rates.
- Closing after tax bills are released: The actual billed amount can generally be used to calculate the tax proration.
From there, the estimated annual tax is divided by 365 to get a daily rate, and each party is credited or charged for their share of days owned that year. That prorated amount shows up as a line item on the closing disclosure — typically a credit to the buyer and a debit to the seller, since the buyer will eventually pay the full bill when it arrives later in the year.
Because this is an estimate, the final bill can land higher or lower than what was prorated at closing. Most Texas purchase contracts address how — or whether — that difference gets reconciled, so it's worth knowing what a specific contract says rather than assuming.
Why Shouldn't a Buyer Assume the Seller's Current Bill Will Be Theirs?
This is the part that surprises new homeowners most, and it's usually not because anyone withheld information, it's just that the reasons aren't obvious from a single number on a listing sheet or closing statement.
A few things commonly change once a home changes hands:
- The seller's exemptions don't transfer. If the seller had a homestead exemption — especially one paired with the 10% appraisal cap after years of ownership — that protection belonged to them, not the property. A buyer who intends to live in the home as their primary residence has to file for their own homestead exemption after closing, using Form 50-115 with MCAD. Texas law allows qualifying buyers to apply for a homestead exemption during the year they purchase their home. However, receiving the exemption for that same tax year generally requires that the previous owner did not receive the same exemption for that year. Buyers should confirm their eligibility and the applicable tax year with MCAD.
- The appraisal cap resets. If a seller had owned the home for years, their taxable value may have been capped well below current market value by that 10% annual limit. A buyer doesn't inherit that cushion; it only applies once they've held a qualifying homestead exemption on the property through a prior tax year.
- Sale price itself can influence future valuation. MCAD reviews market activity, including recent sales, when setting values. A home that just sold for meaningfully more than its prior appraised value may see its appraised value move closer to that sale price in a future appraisal cycle.
Put together, the seller's current tax bill is a reference point at best, not a forecast. A buyer's actual future taxes depend on their own exemption status, the appraisal cap timeline, and how MCAD values the property going forward — not on what the previous owner happened to be paying, and not solely on which way the county's rate moved this year.
Understanding property taxes is just one part of preparing to purchase a home. Our agents help buyers navigate the home buying process in Montgomery County, from evaluating properties to understanding what to expect at closing.
What Should Montgomery County Buyers and Sellers Verify Before Closing?
Buyers:
- Confirm which taxing entities apply to the specific property: county, school district, city (if any), and any MUD or special district, since this varies by block in parts of Montgomery County, and each sets its rate independently.
- Ask whether the seller currently has a homestead exemption and whether it will remain on the property through the rest of the tax year.
- Plan to file your own homestead exemption with MCAD promptly after closing if the home will be your primary residence.
- Understand that your future tax bill may run higher than the seller's, particularly if their taxable value had been capped by long-term ownership.
Sellers:
- Confirm the proration method and closing-date cutoff your title company is using, and which year's data it's based on.
- If you're buying another home in Texas this year, understand how the timing of transferring your homestead exemption works so you don't unintentionally lose it on both properties.
- Check for any pending property tax protest on the home and how it will be handled if unresolved at closing. Preparing to sell a home involves more than setting a listing price. Understanding closing costs, tax prorations, and the steps involved in selling can help homeowners prepare for a smoother transaction.
For anything specific to a particular property's valuation, exemption status, or projected tax amount, MCAD and the relevant taxing entities are the authoritative source. A real estate agent can walk you through the transaction process and flag what to verify, but property-specific tax calculations are outside the scope of what a real estate license covers.
Working with Someone Who Knows Montgomery County
Property taxes are one of those details that quietly shape the true cost of homeownership. A countywide rate change is a useful reminder that a property's total tax bill reflects several local taxing entities, each setting its own rate. Whether you're buying your first home in Montgomery County or selling one you've owned for years, having someone walk you through what to expect at closing and what to verify before you get there, makes the process a lot less stressful.
If you're preparing to buy or sell in Montgomery County, Southern Heritage Realty can help you understand exactly what to expect at closing and point you toward the right resources for anything tax-specific. Contact us today to talk through your situation.
Commonly Asked Questions About Property Taxes in Texas
Who pays property taxes when you buy a home in Texas?
Both parties pay a prorated share based on how long each owned the home during the tax year. The seller covers taxes through the closing date; the buyer covers taxes from closing date forward, and typically pays the full bill when it's issued that fall since Texas bills in arrears.
Do property taxes transfer to the new owner in Texas?
The tax obligation transfers, but the seller's exemptions and appraisal cap don't. A buyer who will live in the home as their primary residence needs to file their own homestead exemption with MCAD after closing.
Will my property taxes go up when I buy a home in Montgomery County?
Often, yes — especially if the seller had owned the home for years under the 10% appraisal cap. The buyer doesn't inherit that cap, and the sale price itself can influence how MCAD values the property going forward.
How are property taxes prorated at closing in Texas?
The title company estimates the year's taxes (using the prior year's bill or current value, depending on timing), divides by 365, and credits or charges each party for their share of days owned. It's a line item on the closing disclosure.
Can I transfer my homestead exemption to a new home?
No. A homestead exemption is based on an eligible homeowner's ownership and use of a property as their primary residence. When purchasing a new primary residence, homeowners generally must apply for a new homestead exemption with the appraisal district serving that property. Certain additional tax benefits, such as an age-65-or-older or disabled person's school tax ceiling, may be transferable when eligibility requirements are met.
What is the Montgomery County property tax rate for 2026?
The county's portion is $0.3860 per $100 of taxable value for FY 2026-27, but that's only one of several taxing entities — school district, city, and often a MUD — that combines to make up a property's total bill.
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