Property Taxes and Community Development Districts Explained

29 November 2025

Let’s face it—property taxes are one of those necessary evils that come with homeownership. You’ve just bought your dream home, you’re unpacking boxes, decorating rooms, and then—bam!—your first property tax bill shows up, and you’re left wondering: “What exactly am I paying for?” If you've bought in a master-planned community, there might be an extra line on that bill labeled “CDD”—and now you're really scratching your head.

Don’t worry. You’re not alone. The world of property taxes and Community Development Districts (CDDs) can be confusing at first. But once you break it down, it all starts to make sense. This guide will help you understand where your money’s going, why it matters, and how these taxes impact the communities we live in.

What Are Property Taxes, Anyway?

Let’s start with the basics. Property taxes are local taxes you pay based on the value of your home and land. They fund important public services such as:

- Public schools
- Police and fire departments
- Infrastructure maintenance (roads, sidewalks, etc.)
- Libraries
- Parks and recreation facilities

So essentially, when you pay property taxes, you're investing in your community. Think of it like a potluck dinner—everyone contributes a little something, and in return, everyone gets to enjoy the feast. Except, in this case, the “feast” is functioning roads, safe neighborhoods, and strong schools.

How Property Taxes Are Calculated

Ever felt like your tax bill is a random number pulled out of a hat? It's not. There's actually a fairly straightforward formula:

Assessed Value of Your Property × Tax Rate = Property Tax You Owe

Local governments assess your property value—usually based on market value, minus any exemptions (like homestead exemptions). Then, they apply the tax rate, often referred to as “millage rate.”

So, for example, if your home is assessed at $250,000 and your local tax rate is 1.5%, your annual property tax would be:

$250,000 × 0.015 = $3,750

Simple math, right? But here’s where it gets spicy—add a CDD into the mix, and now you’ve got an extra line item.

What Is a Community Development District (CDD)?

Okay, now let’s tackle that sneaky acronym: CDD. Community Development Districts are special-purpose government units created to fund and maintain the infrastructure and amenities in new communities.

In plain English? It’s a way developers finance the cost of building things like:

- Roads
- Sewer systems
- Water management
- Street lighting
- Landscaping
- Clubhouses, pools, and parks

Rather than fronting all those costs themselves or raising your home’s sticker price right away, developers form a CDD and issue bonds (think of them like community loans) to pay for the goodies. The homeowners repay that bond through their CDD fees over time.

It’s like buying a pizza with friends and agreeing to pitch in later—everyone who enjoys the pizza chips in for the cost.

CDD Fees vs. HOA Fees: What’s the Difference?

Here’s where people often get tripped up. You might be thinking, “Wait... I pay a homeowner’s association (HOA) fee too! Isn’t that covering the same stuff?” Not quite.

Let’s break it down:

| Feature | CDD Fee | HOA Fee |
|-------------|-------------|-------------|
| Mandatory? | Yes | Yes (if there's an HOA) |
| Purpose | Pays for infrastructure and community facilities | Pays for upkeep of common areas and amenities |
| Duration | Often 20-30 years (until bond is paid off) | Ongoing |
| Tax Deductible? | Sometimes (interest portion) | No |

In short, the CDD fee builds the neighborhood. The HOA fee keeps it pretty.

How Long Do You Pay CDD Fees?

Great question—and it’s one that often gets glossed over. The CDD fee is typically broken into two parts:

1. Bond Repayment – This is the “loan” the community took out to build stuff. It usually lasts 20-30 years.
2. Operations & Maintenance (O&M) – This goes on forever (or at least as long as you live there), covering the costs of mowing, lighting, maintaining pools, and so on.

The bond part will go away once it’s paid, but the O&M part? That sticks around.

Are CDD Fees Tax-Deductible?

We get it—you’re looking for any relief you can find. The answer is… kind of. The portion of your CDD payment that covers bond interest may be tax-deductible as part of your property taxes, but the O&M portion typically is not.

That said, always consult with a tax advisor. What applies in one state may not in another, and the IRS can be a little tricky sometimes.

Why Do Communities Use CDDs?

Good question. From a developer’s point of view, CDDs are super handy. They can offer a lot of benefits to the developer and, believe it or not, to homeowners as well.

Benefits for Developers:

- Avoids a huge upfront investment.
- Helps sell more affordable homes since infrastructure costs are spread out over time.

Benefits for Homeowners:

- Access to well-maintained amenities from Day 1.
- Higher chance of living in a master-planned community with top-notch features.
- Controlled development standards to maintain neighborhood quality.

Think of it like buying a car with monthly payments instead of paying all at once. You get to drive the car today, and spread out the cost over time.

Potential Downsides to Watch Out For

Of course, CDDs aren't perfection in a box. Here are a few things to keep in mind:

1. Higher Monthly Costs

Between the mortgage, HOA, and CDD, your monthly payment could be more than you expected. Always do the math when house hunting.

2. Complexity

Let’s be honest—trying to explain CDD fees to your friends or even your real estate agent can feel like solving a Rubik’s cube while blindfolded.

3. Public Governance

CDDs are run by a board, usually made up of residents and initially the developer. Decisions about your community’s maintenance might feel a bit out of your hands until homeowners take control.

4. Resale Value Concerns

Some buyers might be turned off by the idea of extra fees. It’s not a dealbreaker, but it’s something to keep in mind.

How to Check If a Property Has CDD Fees

Thinking of buying a home? You definitely want to know ahead of time if you’re stepping into a CDD. Here’s how to find out:

- Ask Your Realtor – Honestly, this should be step one.
- Look at the MLS Listing – CDD fees are often listed in the fine print.
- Check With the County Tax Collector – They can verify what portion of your tax bill is going toward a CDD.

Better to ask now than be blindsided later.

Can You Pay Off the CDD Early?

Yes, in many cases you can pay off the bond portion early. Doing so might increase your home’s resale value and eliminate part of your annual tax bill.

But—and there’s always a “but”—you’ll need to look at the terms of the bond. There may be prepayment penalties or interest adjustments. It's kind of like paying off a student loan early—great if you can swing it, but make sure it makes financial sense.

Are CDDs Here to Stay?

You bet. With more master-planned communities popping up and local governments strapped for resources, CDDs offer a smart (if complex) solution to improving infrastructure without massive public spending.

For you, the homeowner, it means more choices, better amenities, and a community built with long-term development in mind.

Final Thoughts: Educate Yourself Before You Buy

Buying a home is exciting, but it’s easy to overlook the small print—especially when that fine print comes with acronyms like CDD. Understanding how property taxes and CDDs work can make a big difference in your wallet, and your peace of mind.

So, when you’re eyeing that beautiful new development with the sparkling pool and perfectly landscaped sidewalks, just ask yourself: “Am I comfortable with how it’s paid for?” If the answer is yes—go for it! Knowledge is power, and now you’ve got a whole lot more of it.