What It Costs to Hold Vacant Land in Texas Each Year
Short answer: Vacant land costs money to hold even when nobody uses it. In Texas the biggest yearly cost is usually property tax: the appraisal district values the land as of January 1, local taxing units set their own rates, bills generally go out around October 1, and you have until January 31 of the next year to pay. After that, Texas Tax Code Section 33.01 adds a 6% penalty for the first month, 1% more each month until a flat 12% on July 1, plus 1% interest a month. Land devoted principally to agriculture can qualify for a much lower agricultural appraisal, but a change of use can bring a rollback tax for the three previous years. Add upkeep the county can require, such as clearing trash or tall weeds, and any owners' association dues. Budget for all of it before you buy, and protest the value if it looks wrong.
Vacant land has a reputation as a quiet investment: no tenants, no roof, no repairs. It still costs money every year you hold it, and those costs decide whether holding beats selling. This guide lists the yearly costs a Texas land investor should budget for, with the dates and rules that set them, so you can run the numbers before you buy rather than after.
1. Property tax, every year
For most vacant land, property tax is the biggest holding cost. The Texas Comptroller's property tax basics explain how it works:
- The value. The county appraisal district appraises your property's value as of January 1 each year. The Texas Constitution generally requires taxing units to tax property based on its current market value.
- The rate. The state does not set local property tax rates. Each local taxing unit, such as the county, the school district, a city or a special district, decides how much tax to raise and sets its own rate.
- The bill. In many counties the county tax assessor-collector collects for the taxing units. Bills generally go out around October 1, and you generally have until January 31 of the following year to pay.
Which taxing units tax your tract depends on where it sits. A parcel inside a city, a school district and a water district pays all three rates; a parcel a mile away may pay fewer. The appraisal district's record for the parcel lists them, and our guide on how to look up property taxes owed in Texas shows where to find the bill.
2. What paying late costs
The Comptroller notes that penalty and interest begin to accumulate on most unpaid tax bills on February 1. Texas Tax Code Section 33.01 sets the amounts:
- a 6% penalty for the first calendar month the tax is delinquent;
- plus 1% more for each additional month or part of a month before July 1;
- a total penalty of 12% for a tax still unpaid on July 1;
- and interest of 1% a month for as long as the tax stays unpaid.
Land with unpaid taxes can eventually be sold at a tax sale. For an investor, the lesson is simple: put the January 31 date on the calendar every year. If you are already behind, our guide on what happens if you stop paying property taxes on Texas land explains the steps that follow.
3. Agricultural valuation can cut the tax
Much rural Texas land is taxed on its agricultural value instead of its market value, which is usually far lower. The Comptroller says land qualifies for 1-d-1 open-space agricultural appraisal when it is currently devoted principally to agricultural use, to the degree of intensity generally accepted in the area, for at least five of the past seven years. You apply to the appraisal district.
For an investor this cuts both ways. Land that already has the valuation can carry a low yearly tax, but only while the agricultural use continues at the level the district expects. If you buy land with the valuation, our guide on keeping an ag valuation as a new owner covers what to do in the first year.
4. The rollback tax if the use changes
The lower appraisal has a catch. According to the Comptroller, when land that received it changes to a non-agricultural use, a rollback tax is due for each of the previous three years in which the land got the lower appraisal. An investor who buys ag land planning to build, subdivide or simply stop the agricultural use should count that bill in the plan. Our guide on rollback taxes on Texas land with an ag valuation walks through when it applies and who usually pays it in a sale.
5. Upkeep the county can require
Unused land still needs some care. Counties can adopt rules for their unincorporated areas, and Dallas County, for example, lists neighborhood nuisances such as accumulated trash, tall weeds and unsafe structures among the things it regulates there. Cities have their own rules for land inside city limits. Budget for mowing or shredding, cleanup after storms or dumping, and fence repair if the land is fenced. If the land is in a subdivision with a property owners' association, add its dues and read its rules.
6. Check the value, and protest if it is wrong
Because the tax follows the appraised value, a wrong value costs you every year. The Comptroller says property owners have a right to reasonable notice of increases in appraised value, and that the appraisal review board begins hearing protests from owners around May 15. Compare the district's value with what similar tracts nearby actually sold for, and protest if it is out of line. Our guide on appraisal district value vs. sale price explains why the two often differ.
Putting the yearly budget together
- Look up the parcel on the appraisal district site: its value, any agricultural appraisal and the taxing units.
- Multiply the value by each unit's rate, or ask the tax office for the last bill, and plan to pay by January 31.
- If the land has an ag valuation, decide whether you will keep the qualifying use, and estimate the rollback if you will not.
- Add upkeep, owners' association dues and insurance if you carry it.
- Compare that yearly total with what you expect the land to earn or gain while you hold it.
Our page for investors looking for Texas land covers what we share about each tract, and you can see the land we have for sale. If the numbers say a tract you already own costs more to hold than it is worth to you, a written cash offer gives you a real figure to compare.
Common questions
- When are property taxes due on Texas land?
- The Texas Comptroller says tax collectors generally send bills around October 1, and taxpayers generally have until January 31 of the following year to pay. Penalty and interest begin on most unpaid bills on February 1.
- What is the penalty for paying Texas property taxes late?
- Under Texas Tax Code Section 33.01, a delinquent tax incurs a 6% penalty for the first month, plus 1% for each additional month before July 1. A tax still unpaid on July 1 carries a total 12% penalty. Interest accrues at 1% a month on top of that.
- Can vacant land in Texas get an agricultural valuation?
- It can if it qualifies. The Texas Comptroller says the land must be devoted principally to agricultural use, to the degree of intensity generally accepted in the area, for at least five of the past seven years. You apply to the appraisal district.
- What is a rollback tax?
- If land that received the lower agricultural appraisal changes to a non-agricultural use, a rollback tax is due for each of the previous three years in which the land got the lower appraisal, according to the Texas Comptroller.
- Can I lower the property tax on my land?
- If you think the appraisal district's value is wrong, you can protest it. The Comptroller says the appraisal review board begins hearing protests around May 15. Check your notice for the deadline that applies to you.
Sources
- Texas Comptroller: Property Tax Basics
- Texas Tax Code Section 33.01 (penalties and interest on delinquent taxes)
- Texas Comptroller: Agricultural and Timber Exemptions and special appraisal
- Dallas County Planning and Development: unincorporated area regulations (nuisances)
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