What is a MUD tax?
Updated 2026-10-30
Short answer: a MUD tax is a property tax charged by a municipal utility district, a small local government that pays for the water, sewer, and drainage lines in a neighborhood. It is added on top of county, school, and other property taxes. In Montgomery County, the typical MUD rate in 2025 was about $0.91 per $100 of taxable value, which is about $3,640 a year on a $400,000 home.
Why MUDs exist
Much new housing around Houston is built outside city limits, where no city provides water and sewer. Texas lets a developer ask the state to create a MUD for the land. The MUD, run by an elected board, sells bonds (with voter approval) to pay for the water plant, sewer lines, and drainage, and then repays those bonds over many years with a property tax on the homes and businesses inside the district. Montgomery County has about 178 MUDs and similar districts.
What the rate pays for
A MUD rate usually has two parts:
- Debt service (also called interest and sinking, or I&S): repays the district's bonds.
- Maintenance and operations (M&O): runs the district day to day.
In the Montgomery County Tax Office's 2025 table, 82 of the 147 utility districts that listed both parts put more of their rate toward debt than toward operations. Each district page on this site shows that split by year.
How much it adds to a home's cost
Rates are quoted per $100 of taxable value. To estimate a year's MUD tax, multiply the home's value by the rate and divide by 100. For example, Montgomery County MUD 129 has a 2026 rate of $1.10, so a $400,000 home owes about $4,400 a year, or about $367 a month, to that district alone. Across the 147 districts above, 2025 rates ran up to $1.50 per $100.
Because MUD rates differ so much, two homes at the same price can have very different total tax bills. Combined rates across fully verified developments in the county run from 1.31% to 3.48% of value. Use the true monthly cost calculator to see what that means for a mortgage payment.
Does a MUD tax ever go away?
Not quickly. The bonds are usually repaid over decades, and the board sets a new rate every year. Rates often come down as more homes are built and the district's total value grows, but they can also go up, and a district can issue more voter-approved bonds. Look at a district's rate history rather than assuming today's rate will hold.
Can I lower my MUD tax?
Possibly. Texas law (Tax Code section 11.13(n)) lets any taxing unit, including a MUD, offer a homestead exemption of up to 20% of a home's value (at least $5,000). Not every MUD offers one, and some offer extra exemptions for owners who are 65 or older or disabled. You apply for homestead exemptions with the appraisal district, which here is the Montgomery Central Appraisal District (MCAD). See the Texas Comptroller's property tax exemptions page for the rules.
You may get a separate bill
Many MUDs collect their own taxes through a private tax assessor-collector instead of the county. Of the 176 utility districts in our data with a listed collector, 33 use the Montgomery County Tax Office and the rest use other collectors. If you pay taxes yourself rather than through a mortgage escrow account, check whether a second bill is coming.
The seller must tell you before you sign
Under Texas Water Code section 49.452, a seller of property in a MUD must give the buyer a written notice before a binding contract is signed. The notice states the district's current tax rate and its bonds. If the seller does not give it, the buyer may be able to end the contract, and a signed copy is recorded at closing. You can read the law on Texas Water Code section 49.452.
Questions to ask before you buy
- Which MUD (and any other special district) is the home in? See how to find a home's MUD.
- What is the current rate, and how has it changed over the last few years?
- How much in bonds has the district issued, and how much more have voters approved? (This is on the seller's notice.)
- Does the district offer a homestead exemption?
- Is the home also in an emergency services district, management district, or public improvement district (PID)? PID assessments are not part of the tax rate.
This guide is general information, not legal or tax advice. Confirm rates and districts for a specific property with MCAD and the district's tax collector.