Texas Property Tax Cap: How It Works, Who Qualifies, and Exceptions

The Texas property tax cap limits how much the taxable value of your home can rise in a single year. For a property with an active homestead exemption, the appraised value cannot go up more than 10% per year, no matter how hot the market gets.¹ A separate 20% cap covers certain non-homestead real property through 2026, and seniors and disabled homeowners get an additional freeze on their school district tax bill.

How the 10% Cap Is Calculated Each Year

Under Section 23.23 of the Tax Code, your appraised value each year is the lower of two figures: the home’s current market value, or last year’s appraised value plus 10%, plus the value of any new improvements.¹ Your appraisal notice shows both numbers. Your tax bill is calculated on the lower one.

A quick example. Your home was appraised at $300,000 last year. The market pushes it to $360,000 this year. Instead of taxing you on $360,000, the appraisal district uses $330,000, which is last year’s number plus 10%. The extra $30,000 stays on the books as market value but does not get taxed this year.

In a market that keeps rising, the gap between market value and capped value can compound. Several years of appreciation above 10% per year can leave you paying tax on a figure well below what your home would sell for.

Who Qualifies for the Cap

The 10% limit is not automatic. It only applies to a residence homestead, meaning a property you own and occupy as your primary home. Rentals, commercial buildings, and vacation homes do not qualify.² To get the cap, you have to apply for a homestead exemption through your county’s central appraisal district. The general filing deadline is before May 1 of the tax year.³

Filing the exemption does not turn on the cap right away. The 10% limitation takes effect on January 1 of the tax year after the first year you qualify for the exemption.¹ Buy a home and file your exemption in 2025, and the cap starts protecting you on January 1, 2026. That first year, the home is appraised at full market value.

If You Missed the Filing Deadline

You can still file a late homestead application for up to two years after the delinquency date for the taxes on your homestead. The delinquency date is typically February 1 of the year following the tax year.⁴ If the appraisal district approves your late application, it notifies the tax collector, who either subtracts the exempted amount from an unpaid bill or refunds what you already paid. No separate refund request is needed.

Homeowners who bought a year or two ago and never filed can lose real money by waiting. The two-year clock runs from the delinquency date, not from when you bought.

What Resets or Breaks the Cap

The gap between market value and capped value can be worth thousands in tax savings by the time it has built up over several years. Two events wipe it out.

Selling the Home

The 10% limitation expires on January 1 of the first tax year in which neither the original owner nor their spouse or surviving spouse qualifies for the homestead exemption on the property.¹ The appraisal district then revalues at full market price, often using the recent sale as evidence. The new buyer files their own exemption and waits until the following January 1 for the cap to start over.

The spouse language matters. Death of one spouse or a divorce in which one spouse keeps the home does not automatically reset the cap. As long as the original owner or their spouse still qualifies, the accumulated savings carry forward.

New Improvements

Adding square footage, building a pool, or making other physical improvements beyond routine maintenance can push your taxable value up more than 10% in a single year. The full market value of the new improvement stacks on top of your capped figure with no 10% limitation.¹ Ordinary repairs and maintenance, like replacing a roof, repainting, or fixing plumbing, do not count as new improvements and do not affect your capped value.

One useful exception: if a structure is destroyed by a casualty such as a fire or storm and you build a replacement, the replacement is not treated as a new improvement. It stays within the cap.

The 20% Cap for Non-Homestead Property

Starting in 2024, Texas added a “circuit breaker” limitation for real property that does not qualify for the homestead cap. Under Section 23.231, the appraised value of qualifying non-homestead property cannot rise more than 20% per year.⁵ To qualify:

The property must be appraised at $5 million or less (the Comptroller may adjust this figure for the consumer price index for 2025 and 2026).
The property cannot already be receiving the 10% homestead limitation or an agricultural-use special appraisal.
The owner must have held the property for at least one full calendar year before the limitation applies.

Unlike the homestead cap, no application is required. The appraisal district applies the circuit breaker automatically. If the property sells, the limitation expires on January 1 of the tax year after the sale, and the new owner’s value resets to full market until they complete a qualifying ownership year.⁵ This provision is set to expire on December 31, 2026, so its future depends on legislative renewal.

Extra Protection for Seniors and Disabled Homeowners

The 10% cap limits how fast a home’s value can grow. A tax ceiling does something stronger: it freezes the actual dollar amount of school district taxes. Under Section 11.26, once you turn 65 or qualify as disabled, the school district cannot charge you more in property taxes than it charged in the first year you qualified for the over-65 or disabled exemption on that homestead.⁶

The ceiling stays in place as long as you own and live in the home, even if the market value doubles. School districts are required to offer this freeze. Many counties and cities adopt optional freezes as well, though those vary by jurisdiction.⁶ Adding new improvements adjusts the ceiling upward by the taxes attributable to the added value, but it does not reset entirely.

Taking the Ceiling to a New Home

Seniors and disabled homeowners who sell and buy another home in Texas can transfer the ceiling to the new property. The transfer works as a percentage, not a flat dollar amount. If the ceiling at the old home saved you 50% compared to what you would have owed without it, that same 50% savings applies to the new home’s school district taxes. On a more expensive home, the dollar amount will be higher, but the proportional savings travels with you. Portability is governed by Sections 11.26 and 11.261. To transfer the ceiling, remove the exemption from the old home and apply for a new homestead exemption at the new address.

Protesting the Market Value

Even with the cap in place, the market value figure matters. It is the ceiling your capped value climbs toward each year, and it becomes the starting point if the cap ever resets after a sale. If the appraisal district overvalues your home, protesting is how you fix it.

File a written notice of protest with your local Appraisal Review Board by May 15, or within 30 days after the appraisal district delivers your notice of appraised value, whichever is later.⁷ No formal form is required. Any written communication that identifies the property, the owner, and the reason for the protest is enough, and most appraisal districts also accept protests online.⁸ Recent comparable sales and photos of any condition issues are the evidence that usually moves a hearing. You can protest exemption status and eligibility for the circuit breaker limitation at the same hearing.

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
Texas Comptroller of Public Accounts. Property Tax Exemptions
4
Texas Public Law. Texas Tax Code 11.431 – Late Application for Homestead Exemption
5
State of Texas. Texas Tax Code 23.231 – Circuit Breaker Limitation on Appraised Value of Real Property
6
State of Texas. Texas Tax Code 11.26 – Limitation of School Tax on Homesteads of Elderly or Disabled
7
State of Texas. Texas Tax Code 41.44 – Notice of Protest
8
Texas Comptroller of Public Accounts. Appraisal Protests and Appeals