Owner next step: compare the market value and appraised value on your latest appraisal notice using the steps below, then model the result with the Rental Revenue Calculator. For a property-specific review of rent and positioning, request a free market analysis.
This article is general education about Texas property tax law, based on the law as of its publication date. It is not legal or tax advice, and IMC Capital does not provide either. A qualified property tax professional or attorney can review your specific property.
Since 2024, Texas has limited how much the appraised value of most non-homestead real property can rise in a single year to 20%, plus the value of new improvements. That generally covers rental homes, small multi-family buildings, second homes, and commercial property valued at $5,320,000 or less for 2026. Under current law the limit expires December 31, 2026, and as of October 31, 2026, no extension has passed.
Coverage of the expiration tends to focus on a one-year jump in property taxes. That risk is real for some properties. How much it matters to you comes down to one number: the gap between your property's market value and its limited value. Zillow's data shows typical Central Texas home values falling through the years the limit has applied, so for many single-family rentals that gap may be small or zero. Your own appraisal record is the way to find out.
The short version
- What ends: The 20% limit on annual appraisal increases, known as the circuit breaker limitation, under Texas Tax Code Section 23.231.
- Who it covers: Non-homestead real property valued at $5,320,000 or less for 2026. Homesteads keep their separate 10% cap.
- What to check: The gap between market value and appraised value on your notice. If the two match, the limit likely isn't holding your value down.
- When it reaches you: 2027 appraisal notices, usually in April or May, then tax bills in fall 2027, generally payable through January 31, 2028.
- What to do: There's no application to file. Estimate the effect, budget for it, and review your 2027 notice when it arrives.
What the cap does
The limit applies to appraised value, not to your tax bill. Under the statute, an appraisal district can raise a qualifying property's appraised value to no more than the lesser of:
- The property's market value, or
- Last year's appraised value, plus 20%, plus the market value of any new improvements.
A few details matter for owners:
- It's automatic. Williamson Central Appraisal District says owners aren't required to apply.
- It starts after a full year of ownership. It takes effect on January 1 of the tax year after the first January 1 you own the property.
- It ends after a sale. The limit expires on January 1 of the tax year after the owner no longer owns the property, and a buyer starts over.
- Some property is excluded. Homesteads and specially appraised land, such as agricultural land and timberland, aren't covered.
- Tax rates are separate. Your bill also depends on the rates local taxing units set each year.
What changes in 2027
The statute's last line is short: "This section expires December 31, 2026." The Texas Comptroller says the same. Williamson CAD explains that unless lawmakers extend the date, the limit "will no longer be in effect" beginning in the 2027 tax year, which "may result in an increase" in taxes on property that had been subject to it. A property held below market value could move up to market value in one year.
Property tax litigator Lee Winston wrote in Bloomberg Tax in June 2026 that owners who have relied on the cap should anticipate a single-year increase in 2027. The key word is relied. An owner whose value was never held down by the limit should have no catch-up from this change.
Here is how the timing works:
| When | What happens |
|---|---|
| December 31, 2026 | The limit expires under current law |
| January 1, 2027 | Appraisal date for the 2027 tax year |
| April to May 2027 | Appraisal notices usually arrive |
| May 15, 2027, or 30 days after the notice, whichever is later | General deadline to protest a value. Check the date on your notice |
| Fall 2027 | Tax bills go out |
| January 31, 2028 | Generally the last day to pay. Penalty and interest begin February 1 |
These dates come from the Comptroller's property tax calendar and protest guidance.
Why the effect may be smaller in Central Texas
The limit only does something when a property's market value has risen faster than the limit allows. Zillow's data suggests that has been uncommon here lately. Its typical home value fell in all 15 Central Texas cities IMC Capital tracks in each year from January 2023 to January 2026, and no city posted a 12-month gain at any point from January 2024 through September 2026.
Typical home value change by city, January 2023 to January 2026
The 20% limit only holds a value down when market value rises faster than the limit allows. Typical values fell in all 15 cities in each of these years. Individual properties and appraisal district values can differ.
Source: Zillow Home Value Index (ZHVI), city level, mid-tier single-family homes and condos, smoothed and seasonally adjusted, January 2023 and January 2026.
If your appraisal district's value has followed the market, your market value and appraised value may already match, and the expiration alone may change little. Values in all 15 cities were also lower in September 2026 than in January 2026, though that says nothing certain about where any 2027 appraisal will land.
This is context, not a prediction for your property. Zillow's index tracks typical mid-tier single-family homes and condos, while appraisal districts value each parcel separately, and their values don't always move with the market.
Who may still have a gap
Some owners may be more likely to have a value sitting below market:
- Homes that recently stopped being a homestead. The Comptroller says the 10% homestead limit expires on January 1 of the tax year after an owner no longer qualifies. If you moved out and turned a home into a rental, as many accidental landlords have, check its record closely, because a value once limited under the homestead rules may still sit below market.
- Property appraised well below market in the past. A 20% limit can keep a low value from reaching market value all at once.
- Duplexes, small apartment buildings, and commercial property. Zillow's home value index doesn't cover these, so the chart above says little about them.
- Property that was sharply reappraised. If a district raised a property's market value by more than 20% in one year, the limit may have held part of that increase back.
How to find your number
1. Look up your latest notice or appraisal record. Your property's appraisal district publishes its values: Travis, Williamson, Hays, or Bell. Some cities, including Austin, Round Rock, Cedar Park, and Leander, cross county lines, so go by the property's address.
2. Compare the two values. Find market value and the limited value. Williamson CAD calls the limited figure assessed value, and other records may call it appraised value. If the two match, the limit likely isn't holding your value down.
3. Estimate the yearly effect. Multiply the gap by your combined tax rate. For a hypothetical rental with a $400,000 market value and a $360,000 limited value, the gap is $40,000. At a combined rate of 2%, used here only to keep the math simple, that is about $800 a year, or $67 a month.
Treat this as a planning estimate. Your 2027 market value will be set as of January 1, 2027, and tax rates are set later in the year, so both can move.
What to do before 2027 notices arrive
Budget for the bill. Add any estimated increase to your 2027 reserves and model it in the Rental Revenue Calculator. If your lender escrows property taxes, a higher bill can also raise your monthly payment after the next escrow review.
Review your 2027 notice when it arrives. Check the market value against what you know about the property. If you disagree with it, Texas owners can protest, generally by May 15 or 30 days after the notice, whichever is later, so check the date on your notice. A property tax professional or attorney can advise on your situation.
Price renewals on the market, not the tax bill. A higher tax bill raises your costs, but it doesn't change what renters will pay. In Zillow's September 2026 rent data, typical rents were up in 10 of the 15 cities and down in 5, from +3.4% in Georgetown to -3.7% in Taylor. Check your city's market data before assuming a rent increase will cover a tax increase, and think through vacancy costs before pushing rent past the market.
Run the numbers on market value before you buy. A seller's limit never transfers to a buyer anyway. When evaluating a rental, estimate taxes on market value instead of relying on the seller's current bill.
Could lawmakers extend it?
Possibly, but it isn't something to plan around. Two 2025 bills would have changed the deadline: HB 202 would have made the limit permanent, and SB 322 would have extended it through 2031 at 10%. Both remained in committee.
The timing is also tight. The next regular legislative session begins January 12, 2027, after the expiration date. The constitutional amendment that authorized the limit has its own December 31, 2026 expiration, and both 2025 bills were written to depend on a new amendment, so a renewal may well need voter approval. That could put any renewal after 2027 notices have gone out.
Governor Abbott's 2026 campaign plan proposed lowering the homestead appraisal cap from 10% to 3% and said it would "expand that cap to all properties." A campaign proposal is not law, and it would need action by the Legislature. The Comptroller's property valuation page is a good place to check the limit's current status.
Frequently asked questions
Does the 20% cap apply to my rental property?
It generally does if it's real property that isn't your homestead, is valued at $5,320,000 or less for 2026, isn't specially appraised, and you owned it on January 1 of the prior tax year. Your appraisal district can confirm how it treats your property.
Does the cap limit my tax bill?
No. It limits appraised value only. Your bill also depends on the tax rates local taxing units set each year.
Do I need to do anything before December 31?
There's no application to file. Williamson CAD says owners aren't required to apply for the limit. The useful steps are looking up your gap, budgeting for it, and reviewing your 2027 notice when it arrives.
Does this affect my homestead?
No. Homesteads have a separate 10% limit, which isn't part of this expiration.
What if I bought the property recently?
The limit takes effect on January 1 of the tax year after the first January 1 you own the property. If you bought after January 1, 2025, it wouldn't take effect before it expires, so the expiration shouldn't be what changes your value.
The bottom line
The expiration matters most for owners whose property has been held below market value. For many Central Texas single-family rentals, the data suggests that gap may be small, but only your own appraisal record can confirm it. The practical steps are the same either way: look up your number, budget from it, and be ready when the 2027 notice arrives.
Sources: enrolled SB 2, enrolled HJR 2, the Texas Comptroller on valuing property and protests, Williamson CAD, and Zillow Research home value and rent indexes through September 2026.
This article describes Texas property tax law in general terms and is not legal or tax advice. Consult a qualified professional about your specific property.
