The goal came in a dramatic conclusion to an otherwise forgettable npower Championship clash.
Hornets defender Taylor, who spent six years with Blues before switching to Hertfordshire in 2010, scored in stoppage-time after Chris Wood's 89th-minute finish appeared to have handed the visitors all three points.
Marvin Sordell had popped up 10 minutes earlier to draw Watford level from long distance with what was only the fourth effort on target of the afternoon.
Adam Rooney looked to have settled an encounter lacking any real tempo or drive when he poked Blues into a half-time lead from close range, pouncing after David Murphy had headed Jean Beausejour's corner back across goal.
The visitors could have been excused after their European exploits on Thursday night, seeing off Nacional 3-0 to qualify for the group stages of the UEFA Europa League, while Watford were winless and the game provided an opportunity to secure their first three-point haul.
Blues point gave them their first away from home in the Championship this term, and Watford's was their first on home soil.
Fit-again Liam Ridgewell made a timely return for Blues in place of centre-back Steven Caldwell, the only change made by boss Chris Hughton.
Watford boss Sean Dyche handed debuts to new signings Jonathan Hogg and Andi Weimann following their arrivals from Aston Villa, the pair starting in place of Troy Deeney and Ross Jenkins.
But there was little for the 11,937 present at Vicarage Road to get excited about in the opening half an hour, with a distinct lack of quality on display from both sides.
The first real clear-cut opening arrived after 36 minutes and it was Watford who could and maybe should have broken the deadlock.
Sordell challenged Blues goalkeeper Boaz Myhill in the air and the ball dropped for Craig Forsyth, who drilled over the crossbar from 12 yards.
Within three minutes Blues had themselves taken the lead at the other end.
Beausejour's corner was nodded back by Murphy and Rooney was on hand to tap home.
Watford raised the tempo at the start of the second half and John Eustace forced a parried save from Myhill.
But the pressure was hardly sustained and, although Blues were posing very little threat in the final third, they were apparently comfortable.
Dyche introduced Deeney from the bench in the 72nd minute in an attempt to bring a different dimension to his side's attack.
Forsyth saw his shot take a deflection off Curtis Davies before being palmed to safety by Myhill.
And then the drama unfolded in the closing stages.
First, Sordell fired left-footed into the bottom corner from 20 yards to draw the teams level.
And with the encounter looking set to finish 1-1, the hosts gave away possession in midfield and Beausejour set up Wood who finished clinically.
Yet there was still time for more late action as Taylor pounced with his close-range header to delight the home support.
Source: DSG