How the Property Tax Cap in Texas Works for Homeowners

The main property tax cap in Texas limits how fast your homestead’s appraised value can rise to 10 percent per year, no matter how hot the local market gets. That ceiling is the single biggest protection most Texas homeowners have, but it works alongside flat-dollar exemptions, a tax freeze for seniors and disabled homeowners, a 20 percent cap for certain non-homestead properties, and a separate limit on how much revenue local governments can collect each year. Each cap has its own rules, its own triggers, and its own ways to lose it.

The 10 Percent Appraisal Cap on Your Homestead

Texas Tax Code Section 23.23 says your homestead’s appraised value, the number used to calculate your tax bill, cannot rise more than 10 percent in a single year above the prior year’s appraised value.¹ Market value, the figure the appraisal district thinks your home would sell for, can jump by any amount. The cap keeps the taxable number from following it up.

The formula: take last year’s appraised value, add 10 percent, then add the full market value of any new improvements you built during the year. Your appraised value for the current year is the lesser of that total or the home’s actual market value. If your home was appraised at $300,000 last year and the market value shot up to $400,000, the appraisal district can only set the new appraised value at $330,000, plus the value of any new construction.¹

The cap takes effect on January 1 of the tax year after you first qualify for a homestead exemption. It continues as long as you or a surviving spouse keep a valid homestead exemption on the property. Once the exemption lapses, so does the cap, and the appraisal district can assess at full market value again.¹

Over time, that 10 percent ceiling creates a gap between appraised value and market value. In fast-rising neighborhoods, that gap can grow to tens of thousands of dollars. The savings are real, but they are also fragile. Several ordinary events wipe them out.

Exemptions That Lower the Taxable Value

The appraisal cap controls how fast your value grows. Homestead exemptions do something different: they subtract a flat dollar amount from the value each taxing unit uses to calculate your bill. The two protections stack.

School District Exemption

Every homeowner with a valid homestead exemption gets $140,000 knocked off the appraised value used for school district taxes. If your capped appraised value is $350,000, the school district only taxes the $210,000 that remains. The exemption was $40,000 before 2023, climbed to $100,000 that year under a voter-approved constitutional amendment, and was raised to $140,000 by the 89th Legislature.²

Over-65 and Disabled Exemptions

Homeowners who are 65 or older or who meet the state’s disability definition get an additional $60,000 off their school district taxable value on top of the $140,000 standard exemption. Cities, counties, and other local taxing units may add their own exemption of at least $3,000 for seniors and disabled homeowners, and many adopt a higher amount.²

The Tax Ceiling for Seniors and Disabled Homeowners

If you are 65 or older or disabled, Texas does more than cut your taxable value. Your school district tax bill freezes at the dollar amount charged in the first year you qualified. Appraised value and the school tax rate can both move, but the actual school tax you owe will never exceed that frozen number.³

The ceiling adjusts in only two directions. It goes up when you add improvements, because new construction is taxed at full value in the year it is completed and then folds into the frozen base. It goes down when the legislature raises exemption amounts or lowers the compressed tax rate, because the law requires those savings to pass through to homeowners already under a ceiling.³

Counties, cities, and junior college districts can adopt their own tax ceilings for seniors and disabled homeowners. If you move within the same taxing jurisdiction, the ceiling transfers proportionally rather than resetting to the new home’s full tax amount.

The 20 Percent Circuit Breaker for Non-Homestead Property

The 10 percent cap is a homestead-only benefit. Commercial buildings, rental houses, and other investment property do not qualify. But Tax Code Section 23.231 created a parallel limit for smaller non-homestead properties: a 20 percent annual cap on appraised value for real property valued at $5 million or less. The legislature authorized the cap for the 2024, 2025, and 2026 tax years, with the $5 million threshold adjusted for the consumer price index.⁴

The formula mirrors the homestead cap at double the rate: prior year’s appraised value, plus 20 percent of that value, plus the market value of any new improvements. Routine maintenance and repairs do not count as improvements. The property must have been owned for at least one full calendar year before the cap applies, and it takes effect on January 1 of the year after that first full year of ownership. Properties already receiving a homestead exemption or an agricultural-use special appraisal are excluded. No application is needed; the appraisal district applies the cap automatically. When the property sells, the cap expires and the new owner starts over.⁴

The provision expires after the 2026 tax year unless the legislature renews it.

Events That Reset the Cap

A homestead that has sat under the 10 percent cap for years can carry an appraised value well below market. Three things end that benefit.

A Change of Ownership

Selling or transferring the property to a new owner resets the appraised value to current market value on January 1 of the following year. Transfers between spouses and transfers to a surviving spouse are the exceptions and do not trigger a reset.¹

This is where buyers get the biggest shock. The seller’s current tax bill reflects years of accumulated cap savings. Your first bill as the new owner will not. If you are shopping for a Texas home, do not rely on the listing’s property tax figure as a guide to what you will pay.

New Improvements

A pool, a garage, a room addition. None of these resets the cap on your home’s original structure, but the value of the improvement is added at full market value in the year it is completed. That new value then becomes part of the base for next year’s 10 percent calculation. Routine maintenance and cosmetic updates do not qualify as new improvements under the statute.¹

Losing Homestead Status

If you stop using the property as your primary residence and neither you nor your spouse keeps a valid homestead exemption, the cap expires on January 1 of the next tax year. Converting the home to a rental is the common example. You can leave temporarily without losing the exemption if you do not establish a different primary residence, you intend to return, and you are away for less than two years. That two-year limit does not apply to active military service or stays in facilities providing health or aging-related care.¹

How Much Local Tax Revenue Can Grow

Caps on appraised value only solve half the equation. If local governments could raise tax rates without limit, those higher rates could cancel out the cap entirely. Texas addresses this through a voter-approval tax rate.

For cities, counties, and most other taxing units, the voter-approval rate is calculated by multiplying the no-new-revenue maintenance and operations rate by 1.035, then adding the current debt rate plus any unused increment from prior years. The practical effect: property tax revenue from existing properties generally cannot grow more than 3.5 percent year over year without voter approval.⁵ The Texas Property Tax Reform and Transparency Act of 2019, originally Senate Bill 2, built this framework and lowered the trigger from the previous 8 percent threshold.⁶

School districts operate under a tighter constraint. Through adjustments to the state compression percentage and the maximum compressed tax rate, the legislature generally holds school district property tax revenue growth to about 2.5 percent. When any taxing unit adopts a rate above its voter-approval rate, an automatic election puts the question to local voters.⁶

Claiming the Cap and Exemption

None of these homestead protections apply automatically. The cap, the exemption amounts, and the senior or disabled tax ceiling all require an application.

The form is the Residence Homestead Exemption Application (Form 50-114), available from your local appraisal district or the Texas Comptroller’s website. You need a copy of your Texas driver’s license or state-issued ID, and the address on that ID generally must match the property address. The form includes a waiver process if it does not.⁷ Submit the completed form to your local appraisal district by mail or through its online portal.

The regular filing deadline is before May 1 of the tax year you are claiming the exemption for.⁸ Miss it and you still have options: Texas allows late homestead applications for up to two years after the delinquency date, including late applications for the over-65 and disabled exemptions. But filing late means the cap starts later. Every year you wait is a year of appraisal-cap protection you cannot get back.

Protesting Your Appraised Value

Even with the cap in place, the appraisal district can set your market value higher than it should be. Since the 10 percent cap uses market value as its upper boundary, an inflated market value can still push up what you owe, especially the year you first qualify or after an improvement.

You have the right to protest the appraised value, the market value, or any exemption decision you disagree with. The deadline to file a written protest is May 15 or 30 days after the appraisal district mails your notice of appraised value, whichever is later.⁹ Most districts offer an informal meeting with an appraiser to try for a settlement before a formal hearing. If no agreement is reached, the case goes to the Appraisal Review Board, an independent panel that hears both sides and issues a binding determination.

Late filing is possible if you can show good cause and the review board has not yet approved the records for the year.⁹ Good cause is hard to prove once you are more than a few days past the deadline. Treat May 15 as firm.

1
State of Texas. Texas Tax Code 23.23 – Limitation on Appraised Value of Residence Homestead
2
State of Texas. Texas Tax Code 11.13 – Residence Homestead
3
State of Texas. Texas Tax Code 11.26 – Limitation of School Tax on Homesteads of Elderly or Disabled
4
State of Texas. Texas Tax Code 23.231 – Circuit Breaker Limitation on Appraised Value of Real Property Other Than Residence Homestead
5
State of Texas. Texas Tax Code 26.04 – Submission of Roll to Governing Body, Adoption of Tax Rate
6
Texas Legislature Online. Senate Bill 2 – Bill Summary
7
Texas Comptroller of Public Accounts. Residence Homestead Exemption Application
8
Texas Comptroller of Public Accounts. Property Tax Exemptions
9
State of Texas. Texas Tax Code 41.44 – Notice of Protest