Local governments and special taxing districts levy taxes on real and tangible personal property. Texas has no state property tax. All property is appraised at full market value, and taxes are assessed by local county assessors on 100% of appraised value. The total tax rate is the sum of the rates of all applicable taxing units including cities, counties, schools, and special districts.

Local governments have the option to exempt goods in transit (or "freeport goods") from ad valorem taxation. Freeport goods are inventories acquired or brought into the state by businesses and held for no more than 175 days before being shipped out of state. A number of jurisdictions in the Austin area have chosen to allow the exemption, which is irrevocable once in effect.

Property utilized for pollution control and solar and wind-powered energy devices used for on-site energy production, distribution or storage are exempt from ad valorem taxation.

Local governments can enter into agreements with businesses to abate local ad valorem taxes on real and personal property for up to 10 years.