Texas Tax Code Section 23.01 is the statute that tells appraisal districts how to value your property for tax purposes. It sets one governing standard — market value as of January 1 each year — and then layers on rules for what methods districts must use, how they must treat homesteads, which comparable sales they cannot ignore, and what happens the year after you win a protest.1State of Texas. Texas Tax Code 23.01 – Appraisals Generally If your notice of appraised value looks wrong, this statute is where the argument starts.
Market Value Is the Standard
Section 23.01(a) requires all taxable property to be appraised at its market value. The definition of that term lives in Section 1.04(7), which describes market value as the price a property would bring in cash or its equivalent under three conditions: it was exposed for sale on the open market with a reasonable time to find a buyer; both buyer and seller knew all the uses the property could serve and any restrictions on those uses; and both acted to maximize their own gain without being able to exploit the other’s situation.2State of Texas. Texas Tax Code 1.04 – Definitions
What that means in practice: the district is supposed to estimate what your property would realistically sell for between strangers negotiating at arm’s length. Not a distress sale. Not a favor between relatives. Not a price inflated because one buyer had to have that specific parcel. If your appraised value exceeds what a knowledgeable buyer would actually pay under normal conditions, that gap is the foundation of a legitimate protest.
The January 1 Snapshot
Section 23.01(a) locks the appraisal to a single moment: the property’s condition and the surrounding market as of January 1 of the tax year.1State of Texas. Texas Tax Code 23.01 – Appraisals Generally A kitchen renovation you finish in March, a hurricane in October, a neighborhood price surge over the summer — none of it factors into that year’s value. It shows up on the next January 1.
The fixed date cuts both ways. Your bill is anchored to a specific moment rather than a moving target, but a home damaged on January 2 is still appraised at its January 1 condition for the full year. Texas addresses that particular unfairness through a separate temporary disaster exemption under Section 11.35, not through Section 23.01.
Generally Accepted Methods, Applied Consistently
Section 23.01(b) requires appraisal districts to use “generally accepted appraisal methods and techniques.” When a district uses mass appraisal, which is how nearly every residential property gets valued, those methods must comply with the Uniform Standards of Professional Appraisal Practice. The statute names specific accepted sources, including the Appraisal Institute’s The Appraisal of Real Estate and USPAP standards published by The Appraisal Foundation.1State of Texas. Texas Tax Code 23.01 – Appraisals Generally
Three approaches dominate. The sales comparison approach looks at recent sale prices of similar properties nearby and is the standard for houses. The income approach estimates value from what a property could earn in rent, which fits commercial buildings and apartments. The cost approach calculates what it would take to rebuild the structure, less depreciation, and works best for unusual properties where comparable sales are scarce.
The statute also demands consistency. The same or similar methods must be used for the same or similar kinds of property, so a district cannot value your house with one methodology and an identical house next door with another. At the same time, each property must be appraised on its own characteristics, and all available property-specific evidence must be considered.1State of Texas. Texas Tax Code 23.01 – Appraisals Generally Showing that a district ignored relevant evidence, or used inconsistent methods across similar properties, is a solid basis for protest.
Foreclosure Sales Cannot Be Ignored
Section 23.01(c) protects homeowners in a soft market. When appraising a residence homestead, the chief appraiser cannot exclude a comparable property in your neighborhood simply because it sold at foreclosure within the prior three years, or because its value dropped due to a declining economy.1State of Texas. Texas Tax Code 23.01 – Appraisals Generally
Without this rule, a district could cherry-pick only healthy, non-distressed sales as comparables and keep assessed values high while actual prices in your area are falling. If you are protesting during a downturn, foreclosure sales near you are fair game as evidence.
Homesteads Are Valued as Homes
In ordinary appraisal practice, property is valued at its “highest and best use,” meaning the most profitable legal use that is physically possible and financially realistic. A vacant lot on a commercial strip is typically valued as retail or office land rather than as an empty yard.
Section 23.01(d) carves out a large exception for homesteads. If you own and live in a residence homestead, the appraisal district must value it solely as a home, even if the land underneath could theoretically fetch more as commercial property or as a higher-density development. The statute states that the market value of a residence homestead “shall be determined solely on the basis of the property’s value as a residence homestead, regardless of whether the residential use of the property by the owner is considered to be the highest and best use of the property.”1State of Texas. Texas Tax Code 23.01 – Appraisals Generally You cannot be taxed on a hypothetical commercial value while you are actually living in the house.
Non-homestead property is different. Highest-and-best-use analysis still applies, but any proposed use must be legally permitted, physically feasible, and financially realistic. Zoning that theoretically allows a high-rise does not, by itself, justify appraising a single-family rental as one; there has to be real market demand and a reasonable likelihood of that development actually happening.
What Happens the Year After You Win
Section 23.01(e) is the provision that stops appraisal districts from erasing your protest win. If your appraised value is reduced through the appraisal review board or district court, that lowered figure becomes the official appraised value for that year. The next time the district appraises the property, the chief appraiser cannot raise the value unless the increase is “reasonably supported by clear and convincing evidence” when all reliable evidence is considered together.1State of Texas. Texas Tax Code 23.01 – Appraisals Generally
Clear and convincing evidence is a higher standard than what governs a typical appraisal. The district cannot simply bounce your number back to where it was; it needs strong, documented justification. This is what prevents the frustrating loop where a homeowner wins a reduction and then sees the same inflated value show up again the following January.
Using Section 23.01 in a Protest
Each subsection of 23.01 doubles as a potential protest argument. If the district’s value exceeds what a real buyer would pay in an arm’s length sale, that is a 23.01(a) argument built on the Section 1.04(7) definition. If comparable properties were valued using different methods than yours, that is a 23.01(b) inconsistency argument. If a district excluded nearby foreclosure sales from its comparables during a downturn, that is a 23.01(c) argument. If your homestead was valued based on commercial redevelopment potential, that is a 23.01(d) argument. And if your value was raised the year after a successful protest without strong new evidence, 23.01(e) puts the burden on the district to justify the jump.
When you go into a hearing, tie your evidence directly to the subsection you are relying on. Comparable sales close to January 1, photographs of condition issues that existed on January 1, and side-by-side comparisons showing inconsistent treatment of similar properties all speak the statute’s language.
What Section 23.01 Does Not Cover
Section 23.01 is the general appraisal rule. Several related situations are handled elsewhere in the Tax Code, and it is worth knowing where the line falls so you do not look for answers in the wrong statute.
The 10 percent annual cap on how much a homestead’s appraised value can increase is in Section 23.23, not 23.01.3State of Texas. Texas Tax Code 23.23 – Limitation on Appraised Value of Residence Homestead Agricultural and open-space valuation, which taxes qualifying land on its productive capacity rather than its market value, is governed by Sections 23.51 through 23.59.4State of Texas. Texas Tax Code 23.51 – Definitions Temporary exemptions for property damaged in a governor-declared disaster fall under Section 11.35.5Texas Comptroller of Public Accounts. Property Taxes in Disaster Areas and During Droughts And business personal property rendition requirements — the annual reporting of inventory, furniture, and equipment used to produce income — are set by Section 22.01.6State of Texas. Texas Tax Code 22.01 – Rendition Generally
Section 23.01 gives you the standard your property is supposed to be valued against. Everything else — the cap, the exemptions, the alternative valuations, the appeal deadlines — builds on that foundation.