# Texas's 20% Appraisal Cap on Rentals, Inherited and Vacant Houses Expires December 31, 2026: What This Week's Bill Filings Do and Don't Change for 2027

> Texas's 20% appraisal cap on rentals, inherited and vacant houses ends Dec. 31, 2026. See what this week's bill filings change and a 2-minute notice check.

**Author:** [Grant Sherrod](https://diamondacquisitions.biz/team/grant-sherrod) — Director of Acquisitions
**Published:** 2026-11-13
**Category:** For sellers
**Canonical:** https://diamondacquisitions.biz/insights/texas-20-percent-appraisal-cap-expires-2026-rental-inherited-houses

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Bill filing for the 2027 Texas legislative session opened on Monday, November 9, and property taxes were all over the first week's stack. A proposed 3% cap on homestead appraisals. A proposal to abolish property taxes outright. A $3,000 credit for first-time buyers. Those are the headlines.

The property tax change that is actually scheduled to happen got far less attention, because it is not a new bill at all. It is an expiration. The 20% cap on annual appraisal increases for Texas real estate that is **not** a homestead, which covers rental houses, inherited houses nobody lives in, second homes, vacant houses and lots, ends on **December 31, 2026**. That is seven weeks from today.

If you own a Texas house you do not live in, this guide covers what expires, how to check in two minutes whether it costs you anything, what the bills filed this week would and would not do about it, and how to think about a house whose holding costs keep rising.

**We are not attorneys, CPAs, or property tax consultants, and this is not legal or tax advice.** The dollar examples below are illustrations built on round numbers and an assumed tax rate. Your appraisal district, your tax rates and your exemptions are specific to your property, so confirm the details with your county appraisal district or a Texas property tax professional before you act on them.

## What expires on December 31, 2026

In 2023, the Legislature passed and voters approved a temporary limit that property tax people call the **circuit breaker**. It lives in Section 23.231 of the Texas Tax Code. In the Texas Comptroller's words, it "sets a limit on the amount of annual increase to the appraised value of real property other than a residence homestead." The limit was 20% a year, plus the value of any new improvements.

The details, from the Comptroller's "Valuing Property" guidance:

- **What it covered:** real property that is not a residence homestead and is not under a special appraisal such as agricultural or timber land. In practice that means rental houses, small apartment buildings, second homes, vacant houses, lots and small commercial property.
- **Value ceiling:** the property had to be valued at or under $5 million for 2024, $5.16 million for 2025 and $5.32 million for 2026.
- **Waiting period:** the cap took effect on January 1 of the tax year after the first year the owner owned the property on January 1. Someone who bought during 2025 or 2026 never got a capped year.
- **End date:** "The circuit breaker limitation expires Dec. 31, 2026."

The expiration is written into the Texas Constitution too. The 2023 amendment added Subsection (n) to Article VIII, Section 1 to authorize the cap, and Subsection (n-1), which reads: "This subsection and Subsection (n) of this section expire December 31, 2026." That second sentence matters. It means the Legislature cannot simply re-pass the statute in January. Bringing a non-homestead cap back requires a new constitutional amendment, which takes a two-thirds vote of both chambers and then a statewide election.

So for tax year 2027, a non-homestead house goes back to the old rule: it is appraised at its market value as of January 1, 2027, however far that is above the prior year's number.

### What is not changing

Your **homestead** is not part of this. The 10% annual limit on a residence homestead's appraised value is a separate, permanent provision. The $140,000 school district homestead exemption that voters approved in 2025 is also untouched. We covered both in our guide to [checking your 2026 Texas property tax bill](/insights/texas-property-tax-bill-2026-homestead-exemption).

Your **2026 tax bill** is not part of this either. The bill that arrived this fall, due by January 31, 2027, was calculated on your 2026 appraised value with the cap still in force.

## The two-minute check: does the expiration cost you anything?

A 20% cap only helps in a year when the appraisal district's market value for the property is more than 20% above the prior year's appraised value. In a market where statewide prices have been close to flat since mid-2022, as we covered in this week's piece on [Texas break-even selling math](/insights/texas-home-prices-flat-since-2022-break-even-selling-math), plenty of non-homestead houses were never capped at all.

Pull up your 2026 notice of appraised value, or search the property on your county appraisal district's website. You are looking for two numbers: **market value** and **appraised value** (some districts label the second one "assessed" or "net appraised"). Then find your row:

| What your 2026 record shows | What the expiration changes for 2027 |
|---|---|
| Market value and appraised value are the same | Nothing by itself. The cap was not reducing your value in 2026. |
| Market value is above appraised value, by less than 20% | Little or nothing. Even with the cap, the district could have raised you to full market value in 2027. |
| Market value is more than 20% above appraised value | You lose the remaining phase-in. The full market value becomes taxable in 2027. |
| You bought the property in 2025 or 2026 | Nothing. The waiting period meant you never had a capped year. |

### What the third row looks like in dollars

Here is an illustration. Say a rental house has a 2026 market value of $310,000 and a capped appraised value of $240,000, and assume the district holds the market value at $310,000 for 2027.

- **If the cap had continued:** the 2027 appraised value could rise 20%, to $288,000.
- **With the cap expired:** the 2027 appraised value is the full $310,000.
- **Difference:** $22,000 of additional taxable value. At an assumed combined tax rate of 2.2%, that is about **$484 a year**, or roughly $40 a month.

That is real money, and for most owners it is not a crisis. The combined rate is an assumption for the example. Yours is the sum of the rates on your own tax statement.

The larger exposure is in future years. From 2027 on, nothing limits a one-year jump on a non-homestead property. If a district reappraises a neighborhood and moves a rental from $240,000 to $330,000, the whole increase is taxable that year. Your remedy is the protest process, not a cap.

## What lawmakers filed this week, and what it would do

The 90th Legislature convenes on January 12, 2027, and members could begin filing bills on November 9. The Texas Tribune counted more than 1,260 bills filed by 5 p.m. on the first day. The filing deadline is March 12.

We read the captions of the property tax bills listed in Texas Legislature Online's filing-date reports for November 9 through November 12. These are the ones a homeowner or small landlord is most likely to hear about:

| Bill | Author | What the filed text would do | Earliest effect, as filed |
|---|---|---|---|
| HB 457 and HJR 35 | Rep. Carl Tepper, R-Lubbock | Lower the homestead appraisal cap from 10% to 2.5%. Create a new 8% cap on non-homestead real property. Let both caps carry over to a new owner after a sale. | January 1, 2028, if voters approve on November 2, 2027 |
| HB 563 and HJR 38 | Rep. Jared Patterson, R-Frisco | Lower the homestead appraisal cap from 10% to 3%. | January 1, 2028, if voters approve on November 2, 2027 |
| HB 1130 and HJR 75 | Rep. Salman Bhojani, D-Euless | A one-time credit for a first-time homestead buyer, capped at $3,000 or half the tax bill, in the first tax year after purchase. | January 1, 2028, if voters approve |
| HB 731, HJR 23 and HJR 58 | Reps. Brian Harrison and Brent Money | Abolish property taxes and study replacement revenue. | Would require voter approval |

Three things stand out for anyone who owns a house they do not live in.

**Only one filing touches non-homestead property.** HB 457 is the only bill we found in the first four days that would give rentals and other non-homestead real estate a cap again. Its 8% limit is tighter than the expiring 20%, and the filed text has no dollar ceiling like the $5.32 million one in the current law.

**Nothing filed so far covers tax year 2027.** Every appraisal-cap bill above takes effect January 1, 2028 at the earliest, and each one depends on a constitutional amendment election on November 2, 2027. In our read of the captions filed through November 12, no bill would keep any non-homestead cap in place for 2027. That can change. Filing stays open until March, and in 2023 lawmakers approved a homestead exemption increase in a summer special session that voters ratified in November for the tax year already under way. A retroactive fix is possible. It is not something to budget around.

**A filed bill is a proposal.** None of these has had a committee hearing. The Texas Tribune reported that Democrats won a majority in the Texas House on November 3 while Republicans kept the Senate, and a new governor takes office in January, so any tax bill needs support from both parties to move. A similar first-time-buyer credit was filed in 2023 and 2025 and did not pass either time. The Tribune also noted that tax policy experts across the political spectrum have warned that tighter appraisal caps do not by themselves lower tax bills, because local governments set the rates applied to those values.

We are not predicting what passes. The on-the-record facts are the expiration date in the law today and the effective dates printed in the bills.

## The bigger tax gap on a house you do not live in

For most owners, the expiring cap is the smaller part of the story. The larger part has been true all along: a non-homestead house gets none of the relief Texas has aimed at homesteads over the past four years.

- **No $140,000 school exemption.** On a homestead, the first $140,000 of value is exempt from school district taxes. At an assumed school rate of $1.00 per $100 of value, that exemption is worth about $1,400 a year. A rental or vacant house next door pays school taxes on the full value.
- **No 10% homestead cap,** and after December 31, no cap of any kind.
- **No over-65 or disability tax ceiling.**

This is where inherited houses get caught. While a parent lived in the house, it likely carried a homestead exemption, the 10% cap, and often an over-65 school tax ceiling. Under the Texas Constitution, the homestead cap expires on January 1 of the first tax year that neither the owner nor a surviving spouse qualifies for the exemption. If no heir moves in, the next appraisal is at full market value with no exemptions. Families are often surprised when the first tax bill after a death is far higher than the one their parent used to pay.

Two cautions. If an heir does live in the house as a primary residence, ask the appraisal district about qualifying for a homestead exemption as an heir-property owner, because that can restore most of the relief. And do not leave a deceased owner's exemptions in place on a house nobody lives in. Appraisal districts can remove an exemption that no longer applies and bill the back taxes.

## What to do between now and May 2027

1. **Run the two-minute check now.** Compare market value and appraised value on your 2026 record. If there is no gap, you can stop worrying about the expiration itself.
2. **Pay the 2026 bill by January 31, 2027.** Penalties and interest start February 1. If that bill is already a problem, read our guide for owners who are [behind on property taxes in Texas](/insights/behind-on-property-taxes-texas) before the deadline, not after.
3. **Document the house's condition as of January 1.** The 2027 value is set as of that date. Dated photos of a failed roof, foundation movement, or an outdated interior, along with repair estimates, are the evidence a protest runs on.
4. **Watch for the 2027 notice of appraised value in the spring.** Read it the day it arrives.
5. **Protest if the value is too high.** The Comptroller's guidance puts the usual deadline at May 15 or 30 days after the appraisal district mails the notice, whichever is later. A protest costs nothing to file. With no cap behind it, the market value on that notice is the number that matters, and the protest is your only tool for a non-homestead house.
6. **Follow the bills, but plan on current law.** If a 2027 fix passes, treat it as a bonus.

## When the house stops earning its keep

A tax increase of $40 a month does not force anyone to sell, and we would not tell you it should. It can be the item that makes an owner finally add up the rest: property taxes with no exemptions, a landlord or vacant-property insurance policy, repairs, months without rent, and the time it takes to manage all of it. Our breakdown of [what a vacant Texas house costs](/insights/vacant-house-texas-what-it-costs) walks through those lines one at a time.

If the numbers still work, keep the house, protest the value each spring, and ignore everyone who wants to buy it, including us.

If they do not work, you have several ways out. A rental in good shape on a quiet street will usually bring the most money listed with a Texas-licensed agent, and if you have the time and the house shows well, that is the path we would point you to. A house that needs work a financed buyer cannot get past, a rental with a tenant in place, or an inherited house full of forty years of belongings is harder to list. That is the kind of house we buy.

Diamond is a direct cash buyer. We buy for our own account, as-is, and we pay the standard closing costs. Our offer math is the after-repair value times 75% to 80%, minus repairs, and 85% to 92% of value on clean houses that need only light work. That is less than a retail sale brings, and we would rather you hear it from us first. If you own a rental you are done with, see how a sale works for a [tired landlord with a tenant in place](/situations/tired-landlord-texas). If the house came to you through an estate, start with our page on [selling an inherited Texas house](/situations/inherited-house-texas).

One more point on timing, because the question comes up. Selling before January 1 does not dodge a tax bill. Taxes are prorated at closing, so you pay for the days you owned the house and no more. Sell when the math says to sell, not to beat an appraisal date.

## The bottom line

- The 20% appraisal cap on non-homestead Texas real estate **expires December 31, 2026**. Homesteads keep their 10% cap.
- Whether it costs you anything in 2027 depends on one comparison: market value against appraised value on your 2026 record. A gap over 20% means a larger taxable value next year. No gap means no change from the expiration itself.
- As of the bills filed November 9 through 12, **nothing would restore a non-homestead cap for 2027**. The one proposal that covers non-homestead property would start in 2028 and needs voter approval.
- Your tools under current law are a January 1 condition file and a spring protest, due by May 15 or 30 days after the notice is mailed.
- If the house no longer pays for itself, [tell us about the property](/sell) and we will give you a cash number and an honest read on whether keeping it, listing it, or selling it as-is makes the most sense.

Sources: Texas Comptroller of Public Accounts, "Valuing Property" and "Appraisal Protests and Appeals" (accessed November 13, 2026); Texas Constitution, Article VIII, Section 1(i), (n) and (n-1), as amended by H.J.R. 2, 88th Legislature, 2nd Called Session; Texas Legislature Online, introduced text of H.B. 457, H.J.R. 35, H.B. 563, H.J.R. 38 and H.B. 1130 and filing-date reports for November 9–12, 2026; The Texas Tribune, "Democrats ambitious as Texas Legislature bill filing begins," November 9, 2026; KPRC Click2Houston, November 13, 2026.