Is the 20 percent appraisal cap on Texas rental property going away?
It is scheduled to. Texas Tax Code Sec. 23.231, the circuit breaker limitation on appraised value for real property other than a residence homestead, caps the annual increase in a qualifying property's appraised value at 20 percent of the prior year's appraised value plus the market value of new improvements (Sec. 23.231(d)). It applies to real property appraised at or under an indexed threshold, $5 million for 2024 and adjusted by the consumer price index after that (Sec. 23.231(b), (j)), which covers every single-family rental in Tarrant County. Subsection (k) reads in full: this section expires December 31, 2026. The Legislature that could extend it, the 90th, convenes in January 2027, before 2027 appraisal rolls certify in July; it may extend the cap, let it lapse, or replace it. Nobody knows which today, and anyone who tells you it will or will not be extended is guessing. The cap has only ever limited increases since the 2023 baseline: owners who held before 2023 are treated as acquiring on January 1, 2023 (Sec. 23.231(g)), so it sheltered nothing that happened before then. What a landlord can do now is read the gap between the capped appraised value and the market value on each rental's Tarrant Appraisal District record; that gap, usually small on a house whose value has been flat since 2023, is the appraisal exposure if the cap lapses. A higher appraisal does not raise the bill one for one, because taxing units set rates under the state's revenue limits each fall. This is general information, not tax or legal advice.
What the Circuit Breaker Is
Homesteads have had a 10 percent annual appraisal cap for years. Rentals had nothing until Senate Bill 2 of the 2023 second called session added Sec. 23.231, effective January 1, 2024. Under it, an appraisal district may not raise the appraised value of qualifying real property above the lesser of its market value or the sum of last year's appraised value, 20 percent of last year's appraised value, and the market value of new improvements (Sec. 23.231(d)). The appraisal office still determines market value each year and records both numbers (Sec. 23.231(e)). Repairs and ordinary maintenance are not new improvements (Sec. 23.231(a)(3)); a replacement structure after a casualty is treated specially (Sec. 23.231(h), (i)). The cap does not apply to a residence homestead or to property appraised under the special-use subchapters (Sec. 23.231(c)).
Who It Covers, and When It Attaches
The section applies to real property with an appraised value at or under the threshold in the year the property first qualifies: $5 million for 2024, adjusted each year by the Comptroller for the change in the consumer price index (Sec. 23.231(b), (j)). Every rental house in the corridor is under it by a wide margin. The limitation takes effect on January 1 of the tax year after the first January 1 the owner owns the property, and anyone who owned before the 2023 tax year is treated as having acquired on January 1, 2023 (Sec. 23.231(f), (g)). It ends when the property changes hands: the cap expires on January 1 of the year after the owner ceases to own the property (Sec. 23.231(f)), which is why a buyer of a rental in 2025 or 2026 inherits no cap and gets a fresh start from market value.
The Sunset, in the Statute's Own Words
Subsection (k) is one sentence: this section expires December 31, 2026. The 2025 regular session did not amend it; the statute text as published on September 6, 2026 still carries the sunset. The next opportunity is the 90th Legislature, which convenes in January 2027. Appraisal notices go out in April and rolls certify in July. Property is valued as of January 1 (Sec. 23.01(a)), and on January 1, 2027 the section will have expired, so whether a 2027 bill can reach 2027 values depends entirely on how the Legislature writes it. Do not assume it can, and do not assume it cannot. The Texas Real Estate Research Center flagged the sunset in July 2026 as a factor in effective tax rates on non-homestead residential property (TRERC, The Push and Pull of Texas Property Taxes, July 27, 2026). Watch the filed bills in January. Do not price the outcome in advance.
What a Lapse Would Do to a Tarrant County Rental
Only the gap moves. If the cap lapses, the 2027 appraised value on a rental can go straight to market value with no ceiling. For a house whose capped appraised value already equals its market value, that is a change of zero. For a house whose market value rose more than 20 percent in a year at any point since 2023, the difference the cap held back lands in one notice. Nothing from before 2023 is behind the cap: every owner who held before then was deemed to acquire on January 1, 2023, and the 2023 market value was the uncapped starting line (Sec. 23.231(g)). The Tarrant Appraisal District record for each property shows both numbers, market value and appraised value, because the statute requires the appraisal office to record both (Sec. 23.231(e)). The distance between them is the exposure, and it is a number an owner can read today rather than guess at in April. We do not publish a dollar impact here because it is different on every account and because the cap may yet be extended. And appraised value is not the bill: taxing units adopt rates each fall under the revenue limits in Tax Code Chapter 26, so a jump in appraised value across a district pushes rates down and the bill moves by less than the value did. The gap is appraisal exposure, not a bill forecast.
What to Do Now
Three things, none of them urgent this week. Pull the TAD record on each rental and write down the market value and the appraised value side by side; the gap is your number. Keep the protest habit: the cap limits appraised value, but the market value the district records is what a lapse would expose, and the May protest deadline is the lever on that figure. Protests are filed by the owner or by a licensed property tax consultant; we read the numbers and say when one looks worth filing. And treat the 2027 renewal conversation as one that includes the tax line, because a lease signed in March 2027 will run through the first bills that reflect whatever the Legislature does. When the January bills are filed we will know whether the cap has a sponsor; when the session ends we will know whether it has a future.
Where We Stand
We read the appraised-versus-market gap on every property we manage before the 2027 notices go out, and we tell each owner what the number is on their house, not what the average is. If the cap is extended, that read costs an hour and answers a question. If it lapses, the owner decides whether to protest with that number in hand instead of finding out from the bill.
Common Questions
What is the Texas circuit breaker appraisal cap?
Does the 20 percent cap apply to rental houses in Texas?
When does the Texas circuit breaker cap expire?
Does the appraisal cap transfer when I buy a rental?
Do repairs count as new improvements under the cap?
What should a landlord do before the cap expires?
Sources
- Texas Tax Code Sec. 23.231 (circuit breaker limitation on appraised value of real property other than residence homestead; official statute, pulled 2026-09-06)
- Texas Tax Code Sec. 23.01(a), appraisal as of January 1 (official statute, pulled 2026-09-06)
- Texas Real Estate Research Center, The Push and Pull of Texas Property Taxes (2026-07-27; read 2026-09-04)
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