What Is the 10 Percent Property Tax Rule in Texas?

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Texas homeowners often experience rising property values, especially in fast-growing markets. Fortunately, the state has a safeguard in place to protect homeowners from steep tax increases. It’s known as the 10 percent property tax rule, and it applies specifically to homestead properties.

Understanding the 10 Percent Rule

The 10 percent property tax rule in Texas limits how much the assessed (taxable) value of a qualified homestead can increase each year. Under this rule, even if your home's market value rises significantly due to demand or development, the appraised value used for tax purposes cannot increase by more than 10% annually.

This cap only applies to:

  • Residential properties with a homestead exemption

  • Appraised value increases (not the tax rate itself)

  • Existing homeowners (the cap resets when a property is sold)

Why It Matters

Texas doesn’t have a state income tax, so local governments rely heavily on property taxes to fund services like public schools, emergency services, and road maintenance. In high-growth areas, market values can surge quickly, which would otherwise lead to equally dramatic increases in property tax bills.

The 10 percent cap provides:

  • Stability for homeowners, especially in markets with rising home values

  • Predictability in budgeting for annual property tax payments

  • Protection for long-term residents from being priced out of their homes by tax increases

Important Considerations

  • The cap doesn’t apply to new improvements, such as additions or new structures. These can be fully taxed in the year they’re added.

  • The rule only limits the growth of the assessed value, not the property tax rate, which can still change based on local government budgets.

  • To benefit from this rule, you must have a homestead exemption filed with your County Appraisal District.

Final Thoughts

The 10 percent rule is a vital protection for Texas homeowners, especially in booming real estate markets. If you're eligible, make sure to file for your homestead exemption to take advantage of this benefit.

Reach out to Dimov Partners today for expert guidance on the 10 percent property tax rule in Texas and learn how to protect your home from rising tax bills.

George Dimov