The market value of a property is the starting point.  Market value is established by the sale of the property itself as well as sales of comparable properties nearby.  An exemption may apply to a portion of the market value, depending on its use.  Each property then has its market value and an exemption amount.  The summation of values becomes the tax base. 

Annually local authorities for the county, the city, the school district and other taxing bodies create a budget for the following year.  The total budget amount for each body is divided into the whole tax base of properties being assessed to arrive at a rate.  A levy for each property is calculated for each taxing body by multiplying the rate times the exempted market value.  Each property will have multiple taxing bodies levying assessments against it, and the exemption amounts may not be the same for each body.  The total is the tax bill on that property. 

The total effective rate for a property is the sum of all taxes divided by the value.  Typically, the effective tax rate is 2.5% but lower for owner-occupied residences. 

The tax assessor is a county position, who determines the value of the property according its value at the last sale and the sales of comparable properties nearby.  Periodically the value may be re-assessed to reflect changes in market value.  The assessor has access to sales data for all properties in its jurisdiction.  The assessor is trained and certified by the state to assess market value.  In the spring a notice of valuation will be published by the assessor on a property and sent to the owner. 

Many owners are conflicted about these notices because they want the value to be high for their home, but they don't want to pay higher taxes.  

Exemptions are the most common way of reducing taxes.  Homeowners 65 and older may claim an elderly exemption.  Citizens over 64 may also have their tax rates frozen and not suffer an increase in rates going forward.  This freeze is portable inside Texas and may be moved to another residence.  Veterans who are partially disabled may receive additional exemption amounts, depending on the level of their disability.  Similarly non-veteran owners may receive exemptions when disabled, and the surviving spouse of a 65-year old owner may continue an exemption. 

The most popular exemption is for homestead.  An owner who occupies a residential property as his primary residence can claim homestead exemption.  Renters are effectively paying full taxes because the owner may not claim the homestead exemption on a rental property.  In January the exemption status is determined and that is the time to file for homestead exemption.  Tax assessors generally continue the exemption, once filed, from year to year without requiring re-filing. 

Reduction in market value can also reduce taxes, but requires an appeal. 

Tax invoices are normally printed and mailed in October, after all appeals have been completed.  When the notice of valuation arrives in the April/May timeframe, the owner can file an appeal either formal or informal with the assessor's office. 

An informal hearing between the owner and the certified appraiser for the assessor is where they discuss sales data and the owner presents his case as to why his value is too high.  The appraiser may agree and issue a letter of agreement between the owner and the assessor as to the market value for the current year. 

If the owner and appraiser in the assessor's office cannot agree, the owner may proceed to a formal hearing before a board of appeals to present his case.  Normally, these cases are all heard and adjudicated prior to September, having been filed in May.  

In October after the market values have all been determined, the tax invoices are mailed out to owners.  The owner may pay anytime, but January 31 is deadline for payment without penalty.  Sometimes January 31 falls on a non-working day.  If so, the taxes must be paid the last business day prior.  There is no extension into February. 

Usually, the mortgage servicing company for the homeowner collects an amount each month and sets it aside in an escrow (impound) account to pay taxes in January for the homeowner.  A typical tax bill is actually 3 bills, one for county, one for city, and one for school district.  These 3 invoices are to be paid at their respective payment locations.  The county usually collects for other taxing bodies, like the hospital or utility districts. 

The homeowner should pay these in January because the penalty is a whopping 7% for delaying until February.