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Ten Percent Capped Value: Meaning, Impact, and What You Can Do

May 16, 2020

What is the Ten Percent Capped Value? Does it limit my Texas property tax increases?

Per The Texas Property Tax Code, Section 23.23, the capped value means your property’s appraised value (taxable value) can only increase by a maximum of 10% compared to last year’s value, with some restrictions.  

If the market value of your homesteaded property rises more than ten percent per annum since its most recent appraisal by the Tarrant or Denton Appraisal District, your taxable value increase will be limited to ten percent this year. However, your appraised value will continue to rise until it equals its’ market value. Absent protest, you are just delaying your increased property taxes for a year. And if your most recent appraisal was two years ago your taxable value can rise 20% or, if three years ago, then 30%. The protection you get from the Ten Percent Capped Value is temporary, the only long term solution to protesting.  

Appraised Value vs Market Value

The Market Value of your home is how much your home would get in the current housing market. Think of this as what a current buyer would be willing to pay for your property.

The Appraised Value is the value that property taxes are determined off. The appraised value is determined by a county appraiser.

You can learn more about the differences between market and appraised values here

Why should I protest my current market value if my taxable appraised value is capped?

Fighting your market value is critical to lowering your property taxes in the future. If you don’t fight each year’s proposed increase in market value because it’s not affecting you currently, your taxable increases could continue indefinitely. As the market value continues to increase each year, there might be no end in sight to your annual property tax increases. But if you protest with us, a Texas-based Property Tax Protest Company with decades of experience, you exercise control over your future taxes. That’s why we protest for our clients every year, regardless of the cap. If there’s no reduction there’s no fee. We have our clients covered and save them money long term.

Capped Property Value Case Study

Consider a property that has a $150,000 market value in 2019. Over the course of the past year, the neighborhood saw major appreciation in home & land values. In 2018, that same property was taxed on an appraised value of $120,000. The Ten Percent Capped Value means that in 2019, the taxable value of the property would be $132,000, $18,000 less than the current market value. This is good for the first year of property tax filings, however, in the coming years with continued market growth, the tax value will increase 10% year over year. Protesting the market value of this property in 2019 to reduce it down to $135,000 would result in only a 1% increase in taxable value in 2020.

The Capped Value in a Strong Housing Market

Gentrification can be a mixed blessing to homeowners. It occurs when properties that had been overlooked during previous development activities become attractive to developers.  

Tarrant Appraisal District and Denton Appraisal District can raise land values significantly due to gentrification.  It may be profitable if you can sell and replicate – or even improve -- your living conditions elsewhere.  But what if you can’t move because of age, proximity to your work or family, or simply the inability to sell for enough to support the move?  You are stuck with higher taxes!

The ten percent cap on taxable value increases for homesteaded properties only defers the moment when you can no longer afford to stay in your home, especially if you’re on a fixed income or a salary that doesn’t keep up with the inflation in your taxes. If you’re over 65 you can defer taxes, but the unpaid amounts accrue interest at 8% per annum. The tax lien can’t be foreclosed during your lifetime, but it does reduce the equity available to your heirs.

Property Tax Protest is your one stop shop for all the legal advice and direction you need to cap your Texas property taxes and also protest your market value to ensure you are paying your fair share of Texas Taxes. We’ve represented homeowners in precisely this situation, and we appreciate how important the protest is to those who are most vulnerable.

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