The maximum increase in a home’s taxable value (aka assessed value) is 10% annually, subject to a few limitations:

  • The 10% cap for houses applies only to houses with a homestead exemption filed with the local appraisal district (free and easy to file), and
  • The 10% homestead cap becomes effective the second year after you buy your house.

This is a bit confusing.  Let us consider an example.  Sally purchases a home for $250,000 in October 2020.  She moves in shortly after closing.  Sally applies for a homestead exemption in January 2021 and is granted the homestead exemption.

Sally’s 2021 appraisal district noticed value is $300,000!?  Is this legal?

Yes, unfortunately, the 10% homestead cap is not effective until the year after a homestead exemption is received.  The 10% homestead cap is first effective for 2022.

Part of the market value of the house will be exempt from taxation in 2021, the first year the homestead exemption is obtained.  The amount varies by tax entity.  In the Houston metro area, a homestead exemption will typically reduce the taxable value of a homestead by 10 to 20%.  In Sally’s case with a value of $300,000, the taxable value would likely be $240,000 to $270,000.

The two requirements for a basic homestead exemption are:

  • Own the house on January 1 of tax year, and
  • It is your primary residence on January 1 of the tax year.

Next week we will review over-65 homestead exemptions.

Call us with questions on property taxes at 713 290 9700, or visit us at