The main Texas property tax exemptions and appraisal caps available after Senate Bill 2 and Proposition 4 are a $100,000 school-district homestead exemption for homeowners, a long-standing 10% annual cap on homestead appraisal increases, and a new 20% cap on annual appraisal increases for qualifying non-homestead real property under $5 million. Rate compression layered on top reduces the school maintenance and operations rate for every property owner. Together these measures were estimated by the governor’s office to save the average Texas homeowner more than $1,200 a year.
The $100,000 Residence Homestead Exemption
Voters approved Proposition 4 in November 2023, amending the Texas Constitution to raise the school-district residence homestead exemption from $40,000 to $100,000.1Texas Legislature Online. SB 2 – Property Tax Relief Act – Bill Analysis The first $100,000 of your home’s appraised value is excluded when the school district calculates your tax. On a home appraised at $250,000, school taxes are assessed on $150,000.
Homeowners aged 65 and older and people with disabilities qualify for an additional $10,000 exemption on top of the $100,000 base. For a household on a fixed income, the layered exemptions can meaningfully reduce the school-tax portion of the annual bill.
The exemption is tied to the property you actually live in. Only one home can carry a homestead designation at a time, and the owner has to be an individual rather than a business entity.
How to Claim It
File Form 50-114, the Application for Residence Homestead Exemption, with the appraisal district in the county where the home sits. The form asks for the legal description of the property, your date of birth, and proof you live there. Your Texas driver’s license or state-issued ID must show the property’s address, though the form allows you to request a waiver of that match in certain circumstances.2Texas Comptroller of Public Accounts. Residence Homestead Exemption Application
The general deadline to file is before May 1 of the tax year you want the exemption to apply to.3Texas Comptroller of Public Accounts. Property Tax Exemptions Most appraisal districts post the form online and charge nothing to process it. Once granted, the exemption continues year to year as long as you still live in the home, but keep your address current with the district to avoid problems.
The 10% Homestead Appraisal Cap
Separate from the exemption, Texas homesteads are protected by a long-standing 10% annual appraisal cap under Tax Code Section 23.23. The appraisal district cannot raise your homestead’s appraised value by more than 10% per year above the prior year’s appraised value, plus the market value of any new improvements.4State of Texas. Texas Code Tax 23.23 – Limitation on Appraised Value of Residence Homestead
The cap holds regardless of what the market is doing. If comparable homes nearby sold for 30% more than last year, the district still records the higher market value but can only tax you on the capped amount. Your notice will show both numbers: a market value and a lower capped appraised value. In a hot market the gap widens, which is exactly the situation the cap was built for.
This protection stacks with the $100,000 exemption and with rate compression, so a single homeowner benefits from all three at once.
The 20% Non-Homestead Circuit Breaker Cap
Before SB 2, commercial property, rental houses, and second homes had no cap at all on how much their appraised value could rise in a year. A suburban strip mall could see a 40% or 50% jump in a single reappraisal, with taxes close behind. The circuit breaker provision in SB 2 caps those annual appraisal increases at 20% for qualifying non-homestead real property.5State of Texas. Texas Code Tax 23.231 – Circuit Breaker Limitation on Appraised Value of Real Property Other Than Residence Homestead
The cap applies only to property with an appraised value at or below $5 million in the first tax year it qualifies. It does not apply to homesteads already covered by the 10% cap or to property appraised under special-use categories like agricultural or timber land.5State of Texas. Texas Code Tax 23.231 – Circuit Breaker Limitation on Appraised Value of Real Property Other Than Residence Homestead
How the Cap Follows the Owner
The 20% ceiling follows the owner, not the property. It takes effect on January 1 of the tax year after the owner first owns the property on January 1, and it expires on January 1 of the tax year after the owner sells or otherwise stops owning it.5State of Texas. Texas Code Tax 23.231 – Circuit Breaker Limitation on Appraised Value of Real Property Other Than Residence Homestead A sale triggers a full-market-value reappraisal for the new buyer, and the 20% cap only starts to apply to that buyer the following January. For investors, that reset matters when deciding whether to hold or sell.
2026 Sunset
The entire circuit breaker provision expires December 31, 2026.6Texas Comptroller of Public Accounts. Valuing Property Unless the legislature extends it, non-homestead properties revert to unlimited annual appraisal increases starting in the 2027 tax year. Owners of commercial and rental property under the $5 million threshold should plan for a possible sharp jump if the cap lapses.
School Tax Rate Compression
Compression is not an exemption or a cap, but it works alongside both to lower your bill. The state used surplus revenue to buy down the maintenance and operations rate that school districts charge. For the 2023–2024 school year, the commissioner of education was directed to reduce each district’s maximum compressed rate by $0.107 per $100 of taxable value.7Texas Legislature Online. Texas Senate Bill 2 – 88th Legislature 2nd Called Session You do not file anything to get it; the lower rate appears automatically on every property tax bill.
On a home appraised at $300,000, a 10.7-cent reduction shaves roughly $321 off the annual school-tax portion. Because the compressed rate from 2023–2024 becomes the baseline for calculating future years’ rates, the reduction is locked into the system going forward. The statute that created the one-year formula expired on September 1, 2025, but only because the lower rate had already set the new starting point.8State of Texas. Texas Code EDUC 48.2555 – Maximum Compressed Tax Rate for 2023-2024 School Year School districts still receive the same total funding because the state backfills the difference.
Compression benefits every property type. Apartment buildings, retail space, warehouses, and vacant land all see the same per-dollar reduction as a single-family homeowner.
Protesting an Appraisal You Think Is Too High
Even with the exemptions, caps, and compression, you may still believe your appraised value is wrong. Every property owner has the right to protest, and it costs nothing to file. The deadline for a written notice of protest is May 15 or 30 days after the appraisal district mails your notice of appraised value, whichever is later.9State of Texas. Texas Code Tax 41.44 – Notice of Protest Miss that window and you forfeit your protest rights for the year.
Protests go to the Appraisal Review Board, an independent panel within the appraisal district. You and the district exchange evidence before the hearing. Useful material includes recent sales of comparable properties, photos of damage or deficiencies the district may not have accounted for, and independent appraisals. Bring paper copies or a USB drive; the comptroller’s procedures specifically say not to bring evidence on a smartphone.10Texas Comptroller of Public Accounts. Property Tax Protest and Appeal Procedures In most cases the appraisal district bears the burden of proving your property’s value by a preponderance of the evidence. If you cannot attend in person, you can present by telephone, video conference, or sworn affidavit.
How the Pieces Combine
For a homeowner with a home appraised at $350,000 in 2026, the $100,000 homestead exemption drops the taxable value for school purposes to $250,000. Rate compression keeps the school M&O rate 10.7 cents per $100 below where it would otherwise be. The 10% annual appraisal cap may hold the appraised value well below what the district records as market value. All three protections stack.
Commercial and rental owners get the compression benefit but not the homestead exemption. Their main new protection is the 20% circuit breaker, which expires at the end of 2026 unless the legislature acts. If the cap sunsets, the first reappraisal without it could be jarring anywhere market values have been climbing faster than 20% a year.