Texas Property Owners Should Prep for Single-Year Tax Increase

Property owners who have historically relied on Texas’ 20% non-homestead appraisal cap should anticipate a single-year property tax increase in 2027 because the cap likely won’t be extended. To mitigate the tax consequences, it’s important to act promptly and strategically during the 2026 property tax cycle.

The appraisal cap is set to expire at the end of this year. The 90th Texas Legislature doesn’t convene until Jan. 12, 2027, so without another special session, the cap will automatically expire before lawmakers can revive it.

Renewal is unlikely. Gov. Greg Abbott (R) is running for reelection, and an extension plan is absent from his property tax platform. During the prior legislative session, a bill to renew the cap died in the House Subcommittee on Property Tax Appraisals.

False Promise

The 20% appraisal cap’s limited nature and inconsistent administration also point to its nonrenewal. It applies only to non-homestead properties valued under $5 million.

According to a recent study by the TTARA Research Foundation and Rice University’s Baker Institute for Public Policy, the cap unintentionally led to higher tax rates and an overall property tax increase in every county they studied.

Under Texas law, property taxes are a zero-sum game. Taxing units are permitted to raise tax rates to maintain existing revenue levels despite a change in their tax base. The cap didn’t change the size of the property tax pie; it just altered each taxpayer’s slice.

Further, because of Texas’ decentralized appraisal system, each of its 254 counties was tasked with administering the cap and was inconsistent in doing so. But even with such different applications, appraisal districts would plainly miss applying the cap or apply it to property that statutorily didn’t qualify, such as mobile homes classified as personal property or properties that changed ownership.

Owners should understand that the 20% appraisal cap (like all appraisal caps) wasn’t intended to permanently fix increasing property taxes. They are an administrative mess, and all they do is shift taxes from one taxpayer to another—even when properly applied.

Actionable Steps

Property owners should implement protection measures this year. For capped properties, the 2026 market value will become the baseline.

As most current trends show, appraisal districts believe Texas commercial property values will only go up. Now, increases will vary depending on the appraisal district.

Some appraisal districts interpreted the cap to apply to all properties with a market value below $5 million when the cap was codified in 2023. But because the real estate market has changed, some properties that were below $5 million in 2023 may be valued anywhere between $8 million to $20 million in 2026.

Because of the cap, owners of property in the above situation have been paying taxes not on $8 million to $20 million, but on a 20% increase for each year.

For illustration, consider a hypothetical property that increased in value from $4 million in 2023 to $10 million in 2026. Applying the cap would result in a maximum taxable value of $6.9 million in 2026. But when it comes to 2027 and the cap’s expiration, it is safe to expect that the value will be above $10 million and receive no cap, causing a guaranteed increase in taxable value of at least $3.1 million in one year.

Owners should start building the foundation for potential litigation during the 2026 property tax cycle. For market value protests under Section 41.41(a)(1) of the Texas Property Tax Code, owners should gather market evidence such as comparable sales, lease data, operating information, and any factors that negatively affect the property’s value. Owners also should review appraisal district records for errors in square footage, property classification, condition, depreciation, or other characteristics that may inflate value now and in the future.

For equal and uniform protests under Section 41.41(a)(2), owners should research comparable properties that are assessed by the appraisal district at lower values relative to their market value. Texas property owners are entitled to equal and uniform taxation, and effectively building a case on a property not being equally and uniformly taxed requires identifying comparable properties that are receiving more favorable treatment.

If unsuccessful in protesting, owners should understand they can further challenge the appraisal district’s valuation in district court through claims under Sections 42.25 and 42.26 of the Texas Property Tax Code. If appropriate, property owners should exercise their right to sue. The results of each of these measures (protesting and appealing to district court) will directly influence the scope and extent of the anticipated 2027 valuation increase.

This article does not necessarily reflect the opinion of Bloomberg Industry Group Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Lee D. Winston is a property tax litigator at Gray Winston, focusing on valuation disputes and litigation involving appraisal districts and taxing entities across Texas.

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