The $140,000 Homestead Exemption Doesn't Touch Your MUD Tax. What Katy and Fulshear Buyers Are Getting Wrong
By Bobby Mohebbi, Mohebbi Realty Group | Servicing Katy, Fulshear, Houston, Cypress, Hockley, Richmond
TL;DR
The headline number circulating statewide — "the new exemption saves you $1,400 to $1,700" — describes school district taxes only. In a high-MUD community, school taxes may be little more than a third of your bill. The $140,000 exemption reduces your school district taxable value; it does not automatically reduce what your MUD, county, drainage district or emergency services district charge you. Buyers in newer Katy, Fulshear and Cypress communities routinely budget for a savings figure that assumes an exemption applying to their whole tax bill. It doesn't. File it anyway — it is still the most valuable filing you can make — but budget the real number.
QUICK ANSWER
Does the Texas homestead exemption apply to MUD taxes?
No, not automatically. The mandatory $140,000 residence homestead exemption for the 2026 tax year — raised from $100,000 by Proposition 13, approved by Texas voters in November 2025 — applies to school district taxes. Counties, cities, MUDs and other special districts each decide independently whether to offer an optional local homestead exemption, typically up to 20% of value. In a Katy or Fulshear community where the MUD rate alone can approach or exceed $1.00 per $100 of value, a large share of your tax bill sits outside the $140,000 exemption entirely.
Where the confusion comes from
Statewide coverage of Proposition 13 has been accurate and incomplete at the same time. The accurate part: Texas voters raised the school district residence homestead exemption from $100,000 to $140,000, with an additional $60,000 for homeowners 65 or older or disabled, for a total of $200,000 in school district exemption for those who qualify. The incomplete part: almost none of that coverage says the words school district loudly enough for a buyer in a masterplanned community to catch what it excludes. The typical "$1,400 in savings" figure comes from a simple calculation: $140,000 of exempted value multiplied by a school district rate around 1.0%. That math is correct. It is also the ent
How Texas property tax layering actually works
Your bill is not one tax. It is several independent taxing units, each with its own rate and its own exemption policy, all levying on the same parcel. If you qualify for the Texas homestead exemption, the $140,000 exemption applies to your school district (ISD) taxes. However, it does not automatically apply to every taxing unit on your property tax bill.
The Important Takeaway
The $140,000 Texas homestead exemption is specifically applied to the school district portion of your property taxes. Other taxing entities—such as your county, city, MUD, drainage district, or ESD—may have their own exemptions, but these are not automatically included.
Because local exemptions can vary by taxing district, it’s important to check the specific taxing entities associated with your property when estimating your property tax savings.
What this looks like in a high-MUD community
Take a $450,000 assessed value in a newer master-planned community with a combined rate of roughly 3.2%, of which the school district is about 1.05% and the MUD is about $0.90 per $100.
Without the homestead exemption: roughly $14,400 a year.
With the $140,000 school district exemption: the school portion drops by about $1,470. Everything else — county, drainage, ESD, city if applicable, and the entire MUD levy — is calculated on the full assessed value unless a specific unit offers its own exemption.
Result: roughly $12,930 a year, or about $1,078 a month. The savings is real and worth roughly $120 a month. It is not the "your taxes drop dramatically" impression a buyer forms from statewide headlines. And in a community where the MUD is the second-largest line on the bill, the exemption leaves the fastest-moving part of your tax bill untouched.
Compare that to an established community with a largely retired MUD and a combined rate near 2.4%: the same exemption produces a similar dollar savings on a much smaller starting bill. The exemption helps every homeowner by roughly the same amount. It does not equalize communities.
The part that matters more than the exemption
For most buyers in newer communities, the 10% appraisal cap is the sleeper benefit.
Filing the homestead exemption also activates the limitation under Texas Tax Code §23.23, which caps how fast the assessed value of your homestead can rise — 10% per year, regardless of how far market value moves. In a fastappreciating section, that cap can eventually be worth far more than the exemption itself. And critically, the cap applies to the assessed value used by all taxing units, including your MUD.
So the exemption filing does help your MUD bill — just indirectly, through the cap, and only over time.
The new construction trap
This one costs Katy-area buyers real money in year two.
A home under construction is often assessed on January 1 at an incomplete value — sometimes just the lot. The following January it is reassessed at completed market value. If your escrow was set from the incomplete-year figure, your payment can jump substantially at the first escrow analysis, and you may owe an escrow shortage on top.
Layer that on a high MUD rate and the increase is not small. Ask the builder and your lender directly: what tax year and what assessed value was this escrow estimate built from? If the answer is the incomplete year, budget for the reset before you close, not after.
Also note: the homestead cap does not help in that first reassessment, because the cap generally applies beginning in the second year you qualify.
What to actually do
1. File Form 50-114 with your county appraisal district — HCAD, FBCAD or Waller CAD. It is free, and it is a one-time filing that renews automatically.
2. File promptly after closing. The standard deadline is April 30, and Texas allows late filing up to two years back — but there is no reason to leave it.
3. Ask each taxing unit about optional local exemptions, especially your county, your city if incorporated, and your MUD.
4. Check that it took. Pull your property record on the appraisal district site and look at the exemptions section.
5. If you are 65 or older or disabled, claim the additional $60,000 school district exemption and ask about the school tax ceiling.
6. If you are a veteran with a VA disability rating, ask about the disabled veteran exemption — partial ratings carry partial exemptions and a 100% rating can exempt the homestead entirely. This is an area I work in regularly.
One caveat worth stating plainly: implementation details of the increased exemption have been phased in, and a small number of sources have described the transition differently. Confirm the amount applied to your account with your appraisal district rather than relying on any article, including this one.
Frequently asked questions
Does the homestead exemption lower MUD taxes in Texas?
Not through the mandatory $140,000 exemption, which applies to school district taxes. A MUD may adopt its own optional local homestead exemption, but it is not required to, so you must check your specific district. Filing does, however, activate the 10% annual cap on assessed value increases, which applies to the value all taxing units use.
How much does the 2026 Texas homestead exemption actually save?
The general $140,000 school district exemption saves roughly $1,400 per year at a school rate near 1.0%, before any optional local exemptions from your county or city. In a community with a high MUD rate, that represents a smaller share of your total bill than statewide coverage implies, because the MUD levy typically sits outside the exemption.
Why did my property tax bill go up in my second year in a new build?
New construction is frequently assessed at an incomplete value during the build year, then reassessed at full completed market value the following January. If your escrow was estimated from the incomplete figure, the reset produces a higher monthly payment and often an escrow shortage. Ask which tax year your escrow estimate was based on before closing.
When is the deadline to file a homestead exemption in Texas?
April 30 of the tax year is the standard deadline, and Texas permits late filing for up to two years afterward, with the savings applied retroactively. Filing is free, done once with your county appraisal district, and renews automatically as long as the home remains your principal residence.
ABOUT THE AUTHOR
Bobby Mohebbi leads the Mohebbi Realty Group at Keller Williams Signature Realty, serving the Greater Houston metro including Katy, Fulshear, Richmond, Cypress, Hockley, Sugar Land and Conroe. He holds the SFR (Short Sales and Foreclosure Resource), ABR (Accredited Buyer's Representative) and PSA (Pricing Strategy Advisor) designations, works extensively with VA buyers and sellers, and serves on the Agent Leadership Council at Keller Williams Signature Realty.