Property taxes in Dallas, Texas are a major expense for landlords. As home values rise, tax bills are also increasing, making it essential to understand how the system works. Whether you own a single rental home or manage a portfolio of properties, staying informed can help you reduce expenses and boost profits. 

In this guide, we’ll take a detailed look at property taxes in Dallas and discuss common issues you might encounter. By the end, you’ll have tools and tips for minimizing your tax expenses so that you can focus on what matters most: expanding your portfolio and increasing the return on your investments.

Understanding How Property Taxes Work in Dallas

Unlike some states that rely on income taxes to fund local government services, Texas has no state income tax. As a result, property taxes make up a significant portion of the state’s revenue. In Dallas, this revenue funds programs and services like the police and fire departments, DART transportation, and local infrastructure projects. 

Your property tax bill is determined by multiplying the assessed value of your investment property by the combined tax rate for your location. These tax rates vary depending on which taxing entities govern your property, such as: 

• Dallas County Appraisal District (DCAD): Every year, the DCAD determines property valuations for properties in Dallas county as of January 1st. 

• Dallas City Council: The Dallas City Council sets tax rates for city services. 

• Dallas County: Dallas County manages tax rates for county-wide services. 

• Dallas ISD: Along with other school districts in your area, the Dallas ISD typically receives the largest portion of your tax bill. 

• Colleges and Hospitals: Community colleges and hospitals in the area are funded by property taxes. 

It’s crucial for landlords to understand the difference between market value and assessed value, which is as follows:

• Market value: This is the estimated price your rental property would sell for if it were placed in the open market. 

• Assessed value: This is the value determined by DCAD, which makes up the basis of your property tax bill. 

DCAD’s valuation is based on recent property sales, market conditions, and characteristics of your investmentl property. Proximity to top-rated schools, crime rates, and the age of the property all affect its valuation. The appraisal process follows guidelines set by the Texas Property Tax Code, and DCAD must use mass appraisal techniques to determine values across thousands of properties in Dallas County. 

Once DCAD determines an assessed value, it is multiplied by the total tax rate for your rental property’s location. While tax rates in Dallas County vary, in 2024, they averaged around 1.72% of the assessed property value. This makes Dallas county the third-highest in the country for property taxes. 

Given that property values in Dallas have been growing over the last several years, it’s important for landlords to prepare themselves for rising tax bills. This is particularly true in popular areas like Lower Greenville, Bishop Arts, and Uptown. 

Common Challenges Dallas Landlords Face with Property Taxes

If you’re a landlord in Dallas, you’ll want to be aware of the following obstacles as you navigate property taxes: 

1. Rising property values leading to higher taxes: The Dallas-Fort Worth metroplex has experienced record-breaking growth, with several major corporations relocating to the area. As demand for housing rises, so do home values and tax assessments.  

2. Inconsistent appraisals and valuations: It’s common for two properties in the same neighborhood to have very different assessments. This could be due to clerical errors, flaws in the mass appraisal process, or inefficient market adjustments. 

3. Overlooking tax exemptions: Many landlords don’t realize they can protest property tax assessments or take advantage of exemptions. Rental property investors may be eligible for historic property tax incentives or agricultural exemptions. You may also be able to deduct maintenance costs or depreciation when filing your taxes. 

4. Legislative changes: Texas lawmakers regularly debate property tax reform. Currently, they’re working to lower property taxes by using a $24 billion budget surplus, with plans to lower school district tax rates. The Property Tax Relief Act is also in effect, helping to stabilize tax rates and provide extra funding for schools so they rely less on property taxes. Some lawmakers are in favor of appraisal caps, which could limit how much property taxes increase, but could also lead to higher tax rates to offset lost revenue.

With new tax policies still being discussed, Dallas landlords should stay informed to prepare for potential changes that could affect their rental property costs.  

Tips for Managing Property Taxes for Your Rental Property

Managing property taxes is a critical part of keeping your investments profitable, especially in a fast-growing market like Dallas. Here are some tips to help you maximize your return: 

• Review Your Annual Appraisal Notice Carefully: When you receive your appraisal notice from the DCAD, make sure to look it over closely. Errors in valuation can mean paying thousands more than necessary. Check for mistakes like incorrect square footage, misclassified improvements, or an overestimated market value. If anything is off, you can challenge the assessment. 

• File a Protest if Necessary: If you think your investment property has been overvalued, filing a property tax protest with the Appraisal Review Board (ARB) could reduce your property tax bill significantly. Protests must be submitted by May 15 or within 30 days of you receiving the appraisal letter. Supporting evidence, such as blueprints, photos, or receipts, can improve your chances of winning the case. Many landlords hire property tax consultants who specialize in these appeals. You can learn more about protesting an appraisal by visiting the Comptroller’s website or watching this video provided by the DCAD. 

• Budget for Tax Increases: Since property values in Dallas continue to rise, landlords should plan ahead for higher tax bills. Setting aside a portion of rental income for future increases will help you avoid financial strain when tax bills arrive. It’s also smart to factor property taxes into rental pricing decisions. If taxes in your area are rising, gradual rent adjustments can help maintain profitability while keeping your rental rates competitive. 

Make Property Tax Simple with Evernest

If you’re a landlord in Dallas, Texas, managing your property tax bill can feel like a full-time job—but it doesn’t have to. A professional property manager, like Evernest, can help by handling the everyday responsibilities of owning a rental property. From setting competitive rent pricing to ensuring fair property tax assessments, an experienced property manager can save you time, money, and stress. By outsourcing these tasks, you can concentrate on growing your investment property portfolio in Dallas.