Are MUD Taxes included in Property Taxes?

When you think about owning a home in Texas, it is not only necessary to consider the income taxes you must pay. In this state, there are also MUD taxes, which stand for Municipal Utility District.

It is a subdivision of the State of Texas designed to build infrastructure and provide necessary services in any community, such as sewer, water, and stormwater drainage where they are not found, among others.


Is the MUD tax included in property taxes?

Bonds finance the MUD tax, and the developer will be responsible for paying these bonds. It can take up to thirty years to pay off the bond. It is a dedicated tax for constructing roads, water, and sewer infrastructure in areas where it is not found.

Since it is a bond, it was necessary to create a means through which could pay the corresponding installments. That is why they made the MUD tax. As the debt decreases, so will the taxes.

Over time the MUD taxes will disappear. Of course, that will be when the entire debt is paid off. In short, the MUD tax is intended to pay for utilities that must be paid by utility developers in a MUD area.

MUD taxes are paid on an annual basis and are added to property taxes. The amount changes depending on the neighborhood you are in.

Why you should understand MUDs

Before you begin buying a home in Texas, it is vital to understand all the MUD entails. It is important to understand the taxes and how they will affect you. As mentioned earlier, it is an annual tax paid along with the property tax.

See also  How to get a New Roof for free?

On average home in a neighborhood in Texas may have a property tax rate of 1.9% annually. However, it is a rate that can vary from home to home, even if they are only a few blocks apart.

MUD taxes fluctuate in the same way and, therefore, will have a considerable impact on your expenses. It is recommended that during the search of the property, you have a previous conversation with the real estate agent about the payment of the MUD taxes.

It is a way to know the approximate amount to be paid on each property and to find the best property with the lowest percentage that fits your possibilities.

Approximate MUD tax amount

There is no exact value for all homeowners; it may be as much as $1.40 of total property taxes. These taxes are usually between $2.1 and $3.68 per $100 assessed value.

MUD Taxes

For example, on a $300,000 home, the MUD tax maybe $4,200 annually. Generally, payment must be made by escrow. Should note that MUD taxes are higher in new developments because new infrastructure construction is required.