Texas’s 20% appraisal cap on rentals and small commercial property expires Dec. 31
The circuit breaker that limits yearly appraisal increases on non-homestead property up to about $5 million is written to end with the 2026 tax year, while the comptroller projects slower value growth in 2027.
By Katia Clara · · 3 min read
Texas’s “circuit breaker” limits how much the appraised value of many rental houses, small apartment buildings and commercial properties can rise each year, to 20% [3]. The law that created it states: “This section expires December 31, 2026” [2].
Harris Central Appraisal District says the Legislature authorized the limit only for the 2024, 2025 and 2026 tax years [3]. Continuing it would take new legislation.
The cap applies automatically to property under the value limit
It covers real property that does not receive a homestead exemption and is valued at or below the limit, which was $5 million in 2024 [2][3]. Farm and timber land are excluded, and owners do not apply [3]. The comptroller adjusts the limit each year by inflation, rounded to the nearest $10,000 [2].
The cap starts in the year after an owner’s first full tax year of ownership and ends on Jan. 1 of the first tax year after the owner sells [3].
| With the 20% cap | Without the cap | |
|---|---|---|
| Last year’s appraised value | $1,000,000 | $1,000,000 |
| This year’s market value | $1,250,000 | $1,250,000 |
| Taxable value | $1,200,000 | $1,250,000 |
| Tax at a 2% combined rate | $24,000 | $25,000 |
Statewide values are growing more slowly
The comptroller’s office, in a Sept. 30 release, put 2026 taxable value at $4.33 trillion and projected growth below the 6% to 10% yearly gains of recent years [1]. The same release credits voters with raising the school homestead exemption to $140,000 [1]. Taxable value for 2025 was $4.12 trillion, about flat with the year before [1].
Market prices point the same way. Zillow’s Texas home value index stood at $296,424 in September, and the Houston and San Antonio metros were down 1.82% and 1.90% from a year earlier [4]. The cap only limits a property whose appraisal would otherwise rise more than 20% in one year [3], so falling prices make it bind less often.
How to use this
For landlords and small commercial owners
- Pull your 2026 appraisal notice and compare the capped value with the market value. Any gap could be added to your 2027 taxable value if the cap ends [2][3].
- Budget 2027 taxes on market value. In the appraisal district’s example, we calculate the cap saves $1,000 a year at a 2% rate [3].
- Protest a 2027 value that runs ahead of local prices. In Austin, Zillow’s index fell 4.31% in a year, and in Dallas 2.05% [4].
For buyers of rental property
- Underwrite property taxes on the purchase price, because the cap does not follow the property to a new owner [3].
- Ask the seller for the 2024 to 2026 appraisal notices, the three years the cap has been in force, to see how much of the current tax bill reflects it [3].
For investors tracking Texas markets
This is market commentary, not investment or legal advice.
Sources
- [1]Texas Comptroller of Public Accounts, Statewide taxable property value estimates, 2026–28, Sep 30, 2026.
- [2]State of Texas (via Justia), Texas Tax Code section 23.231, circuit breaker limitation on appraised value, 2024.
- [3]Harris Central Appraisal District, Circuit breaker cap, 2026.
- [4]Zillow Research, Zillow Home Value Index, state and metro files, through September 2026, Sep 2026.
