In Texas, once your home qualifies for the residence homestead exemption, the appraisal district generally cannot raise its appraised value for taxes by more than 10 percent a year, plus the value of any new improvements. That is the homestead cap in Tax Code Section 23.23. It belongs to the owner who qualified, not to the house. When you buy a home, the seller's capped value does not carry over to you, and your own cap starts on January 1 of the tax year after the first year you qualify for the exemption.
Section 23.23(a) limits the appraised value of a residence homestead for a tax year to the lesser of two numbers (Texas Tax Code 23.23):
The appraisal district still records the full market value every year. The capped number is the appraised value used for the homestead's taxes.
The limitation takes effect on January 1 of the tax year following the first tax year the owner qualifies for the general homestead exemption under Section 11.13. It expires on January 1 of the first tax year that neither the owner, nor the owner's spouse or surviving spouse, qualifies for the exemption. That is why a buyer usually goes one full tax year without a cap of their own. You still need to apply for the homestead exemption itself; the cap follows from qualifying for it.
A new improvement is one made after the most recent appraisal that increases market value and was not already in last year's appraised value. Repairs and ordinary maintenance of an existing structure are not new improvements. The statute's definition decides, not the label on a contractor's invoice. A room addition or a new pool can be added on top of the 10 percent. A replacement structure after a casualty or wind or water damage is treated differently under Section 23.23(f).
The seller's tax statement often shows a capped value well under what you are paying. If your escrow is built from the seller's bill, the next notice of appraised value can move toward market value, because the cap was the seller's. Lenders usually estimate taxes for a purchase from the current tax information and the purchase price, and the servicer adjusts the escrow once the real bill arrives. See how taxes are split at closing for the closing side of this.
Fictional example: a Fort Worth seller has owned for many years and has a capped appraised value far below market. A buyer purchases in June at a price close to market value. For the next tax year, the buyer is not yet entitled to a cap, so the appraisal district can value the home at market. The buyer applies for the homestead exemption for that year. The cap begins the following January 1. The buyer's tax estimate should be built from market value and the local rates, not from the seller's capped value.
If you think the market value itself is wrong, that is a separate process: a property tax protest with the appraisal review board.
If you are buying in Tarrant County and want a payment estimate built from realistic taxes instead of the seller's capped value, I can help you set it up. Book a call, or start an application.
Links checked Oct 21, 2026.
About the author: McKade Lively, NMLS 2704474, American Pacific Mortgage Corporation dba True North Home Loans, NMLS 1850.
Equal Housing Opportunity.
Last reviewed: Oct 2026