How Property Taxes Work on New Construction Homes

By Steven | Refind Realty

If you’re buying a new construction home in Texas, especially around Dallas-Fort Worth, understanding how property taxes are assessed is a big deal. I get this question from almost every client I work with: “Will I pay full taxes the first year?”

The short answer is no — but the longer answer is worth understanding, because it impacts your monthly payment, escrow, and budget planning. Let me break it down for you clearly and simply.

Why New Construction Property Taxes Are Different

In Texas, property taxes are based on the appraised value of the home and land combined. When you buy a new construction home, that value usually changes between when you sign the contract and when the home is complete.

Most counties appraise:

• The land only during the construction year

• The land + home the year after it’s completed

That means your first tax bill will often be much lower than your second year’s — and that’s where surprises happen for many homeowners.

How This Impacts Your Escrow Account

Your lender collects money each month to cover taxes and insurance. If your first-year tax bill is artificially low (because the home wasn’t fully assessed), your escrow account might come up short in year two.

When that happens, your mortgage servicer will either:

• Send you a bill to cover the shortage

• Increase your monthly payment to cover the new tax estimate

This is why I always help my clients estimate their “true” tax amount based on the full value of the home, not just the initial bill.

👉 Download the Lone Star App to estimate your future taxes before closing.

Real-World Example

Let’s say you buy a new construction home for €352452.00 in DeSoto. In year one, the county might only assess the land at €52867.80. Your tax bill might be around €1321.69.

In year two, the county adds the house to the appraisal. Now your full value is assessed, and your taxes jump to €7049.04. If your mortgage company only collected enough for €1321.69 the first year, that €5727.34 difference has to be made up — usually by raising your monthly payment.

How to Prepare the Right Way

• Ask for the full estimated tax amount before closing

• Use the county’s tax rate and the full home value to calculate it

• Plan your budget around the future, not the first bill

• Check for available exemptions like the Homestead Exemption

You don’t want your monthly mortgage payment to suddenly increase by several hundred dollars just because the first year felt light.

Final Thoughts

Property taxes on new construction homes don’t have to catch you off guard. With the right knowledge and preparation, you’ll know exactly what to expect — and avoid budget surprises down the road.

👉 Download the Lone Star App here to get started
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FAQs

Q: Do I have to pay property taxes on a home that’s not finished yet?
A: You pay based on the appraised value at the time of assessment, which may include land only if the home isn’t complete.

Q: When will I get the full tax bill?
A: Typically the year after your home is completed and you’ve moved in. The appraisal district updates the value in spring or early summer.

Q: Will my lender adjust my payment?
A: Yes. If your escrow comes up short after the first full tax year, your lender will increase your monthly payment to make up the difference.

Q: Can I avoid this surprise?
A: Absolutely. I always help my clients run a true tax estimate based on the home’s completed value.

Q: What if I qualify for a Homestead Exemption?
A: You’ll still pay taxes, but the exemption can reduce your taxable value, lowering your bill. I’ll help you apply after closing.