Prejudgment Interest in Texas: Rate, Accrual, and Offer Caps

Prejudgment interest in Texas is money added to a civil damages award to compensate the winning party for the time between the injury or loss and the date of judgment. It is mandatory in personal injury, wrongful death, and property damage cases, and available in most other civil disputes under equitable principles. The rate tracks the prime rate published by the Federal Reserve, with a 5% floor and a 15% ceiling, and sits at 6.75% as of early 2026.¹ It is always simple interest, never compounded.

The Rate and How It’s Calculated

For statutory prejudgment interest in personal injury, wrongful death, and property damage cases, the rate equals the postjudgment interest rate in effect at the time the court renders judgment.² That postjudgment rate is set by Section 304.003 of the Finance Code, tied to the prime rate, with a minimum of 5% and a maximum of 15%.³ The Texas consumer credit commissioner recalculates the rate on the 15th of each month for judgments rendered the following month.

If the prime rate drops below 5%, courts use the 5% floor. If it climbs above 15%, the cap applies. As of March 2026, the applicable rate is 6.75%.¹

Interest accrues as simple interest only, meaning it runs on the original damages amount and does not compound.⁴ On a $200,000 damages award at 6.75%, one full year of prejudgment interest adds $13,500. Two years adds $27,000. The math stays that clean regardless of how long the case runs.

When the Clock Starts and Stops

In personal injury, wrongful death, and property damage cases, Section 304.104 sets the start date as the earlier of two events:

The 180th day after the defendant receives a written claim, such as a demand letter or settlement proposal.
The date the lawsuit is filed, if the plaintiff files without sending written notice first.

Interest stops accruing on the day before the court renders judgment.⁴ A plaintiff who sends an early, documented demand letter can start the clock months before filing suit, which adds real money to the eventual judgment.

For contract claims and other disputes handled under equitable principles, there is no automatic 180-day trigger. Interest typically runs from the date the loss occurred or the money should have been paid. For unpaid invoices, that is the invoice due date. In more complex business disputes, courts pick the date when the loss became fixed and ascertainable.

What Damages Qualify

Statutory prejudgment interest under Subchapter B applies to judgments in wrongful death, personal injury, or property damage cases.⁵ Within those cases, both economic damages (medical bills, lost wages, repair costs) and noneconomic damages (pain and suffering, mental anguish) earn interest. The Texas Supreme Court made that explicit in Cavnar v. Quality Control Parking, Inc. in 1985, and the principle carried into the statutory framework.⁶

Two categories are excluded. Exemplary (punitive) damages do not earn prejudgment interest under Section 41.008 of the Civil Practice and Remedies Code. Future damages, meaning amounts awarded for losses the plaintiff has not yet suffered like future medical care or future lost earnings, are also excluded, because the rationale for prejudgment interest is compensation for money the plaintiff was already owed.

The scope of “property damage” is narrower than it sounds. In Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., the Texas Supreme Court held that the term covers only physical damage to tangible property, not pure economic loss or lost business opportunities.⁷ Claims for economic loss without tangible property damage fall outside Subchapter B and depend on equitable interest instead.

Statutory vs. Equitable Interest

Texas recognizes two paths to a prejudgment interest award. Statutory interest is governed by Chapter 304, Subchapter B of the Finance Code, and Section 304.102 makes it automatic in wrongful death, personal injury, and property damage judgments.⁵ Courts have no discretion to deny it.

Everything else — breach of contract, fraud, tortious interference, and other business torts — falls under equitable prejudgment interest. The Johnson & Higgins court confirmed the statutory scheme is limited to personal injury, wrongful death, and tangible property damage, and that equitable interest for other claims must be computed as simple interest, following the legislature’s lead.⁷

In contract cases where the contract itself specifies an interest rate, courts enforce that rate as long as it complies with the usury limits in Chapter 303 of the Finance Code.⁸ When the contract is silent, the Section 304.003 rate applies.³

How Settlement Offers Cap the Interest

Section 304.105 of the Finance Code gives defendants a way to stop the meter. If the defendant makes a formal settlement offer and the plaintiff’s eventual judgment is equal to or less than that offer, prejudgment interest does not accrue on the offered amount. A well-timed offer can eliminate months or years of interest.

The incentives run both directions. Defendants benefit from making early, documented offers. Plaintiffs need to evaluate offers carefully, because rejecting a reasonable offer and failing to beat it at trial means losing the interest that would otherwise have accrued on that portion of the award.

What Happens After Judgment

Once the court signs a final judgment, any unpaid portion (including the prejudgment interest already added) begins earning postjudgment interest. The rate is the same as the prejudgment rate, but with one critical difference: postjudgment interest compounds annually.³ Prejudgment interest never does.

Postjudgment interest starts running on the date the judgment is signed and does not stop during an appeal. In Miga v. Jensen, the Texas Supreme Court held that a defendant who supersedes a judgment to block enforcement during appeal still accrues interest the entire time. The debtor can stop interest only by paying the judgment; posting a supersedeas bond to pause collection does not pause interest.⁹ A long appeal at a compounding rate can add a significant sum to an already substantial judgment.

1
FRED | St. Louis Fed. Bank Prime Loan Rate (DPRIME)
2
State of Texas. Texas Finance Code Section 304.103 – Prejudgment Interest Rate for Wrongful Death, Personal Injury, or Property Damage Case
3
State of Texas. Texas Finance Code Section 304.003 – Judgment Interest Rate
4
State of Texas. Texas Finance Code Section 304.104 – Accrual of Prejudgment Interest
5
State of Texas. Texas Finance Code Section 304.102 – Prejudgment Interest Required in Certain Cases
6
Justia. Cavnar v. Quality Control Parking, Inc. (1985)
7
FindLaw. Johnson Higgins of Texas Inc v. Kenneco Energy Inc (1998)
8
State of Texas. Texas Finance Code Section 303.015 – Variable Rate
9
Justia. Dennis L. Miga v. Ronald L. Jensen (2009)