Austin Rental Owners: The 20% Tax Cap Ends Dec 31

What happens when Texas's 20% appraisal cap on rental homes ends?

Texas's 20% "circuit breaker" cap on non-homestead property values expires on December 31, 2026. Starting with the 2027 tax year, an Austin-area rental or second home with a capped value below market value can be appraised at its full market value in one step, so the 2027 tax bill can jump even if prices are flat. Homesteads keep their separate 10% cap, and nothing has to be filed to keep or lose the 20% cap.

By Carmen Reese | The CLR Sales Group | November 9, 2026

If you moved up into a bigger home and kept your first Austin home as a rental, this one is for you. The same goes for second homes, inherited homes you haven't sold yet, and a small duplex you rent out.

For the last three tax years, those homes have had a quiet protection. Their taxable value could only rise 20% a year, even when the market value rose faster. That protection is scheduled to end on December 31, 2026, and a lot of owners don't know it exists, because nobody ever had to apply for it.

Let me walk you through what it is, who it actually affects, and what I would check before the 2027 appraisal notices show up.

What the 20% circuit breaker actually is

Under Texas Tax Code Section 23.231, the appraised value of non-homestead real property can't go up more than 20% from one year to the next, plus the value of any new improvements. Here is how the appraisal districts describe the details:

• It only covers non-homestead property. Your homestead already has its own 10% cap. The 20% cap is for rentals, second homes, and other property that isn't your main residence.
• There's a value limit. For 2026, the Texas Comptroller says the cap applies to property valued at $5,320,000 or less, so nearly every home in our price range qualifies.
• You have to own it a full year first. The Travis Central Appraisal District says you must own the property for at least one full calendar year to qualify.
• It's automatic. TCAD says no application is needed. That's why so many owners have never heard of it.
• It was temporary from the start. In TCAD's words, the Legislature "has currently only authorized the circuit breaker limitation for the 2024, 2025, and 2026 tax years." The Comptroller's page says the limitation "expires Dec. 31, 2026."

A bill was filed in 2025 to make the cap permanent, and it did not move past committee. The next regular legislative session starts in January 2027, which is after the cap expires. So the safe way to plan is to assume it ends on schedule.

Will your 2027 bill actually go up?

Here's the honest part. It depends on the gap between your home's capped appraised value and its market value.

Austin values have been soft. TaxDrop reported that the average homestead value fell 2.4% in Travis County and 3.3% in Williamson County from 2025 to 2026. In a flat or falling market, a lot of rentals already have a capped value sitting at or near market value. For those homes, the cap ending may change very little.

The owners who should pay attention are the ones whose capped value is still well below market value. That usually means you bought years ago, or the home is in an area that held its value better than the rest.

Here's a simple example, just to show the mechanics:

• Market value on your 2026 notice: $450,000
• Capped appraised value on your 2026 notice: $400,000
• If the cap ends and the 2027 market value stays at $450,000, your taxable value could rise by $50,000
• At the 2025 combined City of Austin, Travis County, AISD, and Central Health rate of about 1.94 percent, that's roughly $970 more a year, before any ACC tax or other districts on the address

Your numbers will be different depending on your location, your neighborhood, and your city's rates. The point is that you can find out right now, because both values are printed on your notice.

If you're weighing a move-up purchase or trying to figure out whether a rental still makes sense, make sure to attend our next live Homebuyer Webinar. Register here.

What I would do before 2027

1. Pull your 2026 notice and find the gap

Look up the property on your appraisal district's site (TCAD, WCAD, Hays CAD, or Bastrop CAD). Compare the market value with the appraised value. If they're the same, the cap isn't doing anything for you today. If the market value is higher, the difference is roughly what could come back onto your taxable value.

2. Rerun your rental math with the full-value tax bill

Take the gap, multiply it by your combined tax rate, and divide by twelve. Add that to your monthly cost of owning the home. Then compare it with the rent you're getting. This is the number that tells you whether the rental still works for you in 2027.

3. Know that a buyer never inherits the cap

This matters if you're thinking about selling. Williamson CAD explains that the limitation ends on January 1 of the year after you no longer own the property, and a new owner has to own it for a full year before they can qualify. So any investor buying your rental will look at taxes at full market value anyway. Selling before December 31 doesn't "save" the cap for anyone. It just means you're the one who doesn't pay the 2027 bill.

That's why I'd never rush a sale just because of this deadline. Make the sell or hold decision on the real numbers: what the home would sell for this winter, your rent, your rate, your equity, and the capital gains picture.

4. Get ready to protest in the spring

If your 2027 notice jumps, you can protest it. The 2026 deadline in Travis County was May 15 or 30 days after the notice was delivered, whichever was later, and the 2027 schedule is usually similar. A big one-year jump is exactly the kind of notice worth checking against what similar homes actually sold for.

5. If you're moving back in, ask about the homestead cap

If you plan to move back into the home as your main residence, you can file for a homestead exemption once you qualify. The 10% homestead cap generally starts the year after the home first qualifies as your homestead. Confirm the timing for your address with your appraisal district.

This is not tax or legal advice. Confirm your situation with your CPA or a property tax professional.

Frequently Asked Questions

Does the end of the 20% circuit breaker affect my homestead?

No. Your homestead has its own 10% annual cap on taxable value, and that cap is not expiring. The 20% circuit breaker only applies to non-homestead property, like rentals and second homes.

How much could my Austin rental's taxable value go up in 2027?

Up to the gap between its capped appraised value and its market value, plus any change in market value next year. Both numbers are on your 2026 appraisal notice, so you can estimate it today.

Should I sell my Austin rental before the cap ends?

Not because of the cap alone. A buyer never inherits the cap, so an investor will price the home with full-value taxes either way. Base the decision on the home's sale price, your rent, your equity, and your taxes, and talk to your CPA about capital gains.

Do I need to file anything to keep the 20% cap?

No. TCAD applies it automatically, and there's no form to keep it after 2026. Unless the Legislature acts, it simply stops applying for the 2027 tax year.

Can I protest if my rental's appraisal jumps in 2027?

Yes. Any owner can protest their appraised value. Watch for your 2027 notice in the spring and file by the deadline printed on it.

The bottom line

If you own an Austin-area home that isn't your homestead, the 20% cap that has been limiting its taxable value ends on December 31, 2026. For some owners it won't change much. For others it means a noticeably bigger 2027 bill, and the time to find out is now, while you can still plan around it.

If you want help running the hold or sell numbers on your rental, or you're thinking about turning that equity into your next home, book a free 15-minute consult with Carmen. And make sure to attend our next live Homebuyer Webinar (register here).

Sources: Texas Tax Code Sec. 23.231 (via Justia); Texas Comptroller, Valuing Property (read Nov 9, 2026); Travis Central Appraisal District, Circuit Breaker page; Williamson Central Appraisal District knowledge base; TaxDrop Texas property tax bill tracker (Oct 8, 2026); 2025 combined Austin tax rate from City of Austin, Travis County, AISD, and Central Health adopted rates (via Community Impact). Rates and rules as of November 2026.

About Carmen Reese

Carmen Reese is an Austin native and the founder of The CLR Sales Group at Real Broker, LLC. She has been selling homes in the Austin area for almost a decade. Before real estate she worked as a data analyst, and she is a Certified Negotiation Expert, so every pricing and offer decision starts with the numbers. Carmen and her team are RealTrends Verified in the top 1.5% of real estate professionals nationally. She hosts the weekly Homebuyer Webinar and The Austin Homebuyer Academy on YouTube.