You budget from the tax figure you saw on the listing. You close. Twelve to eighteen months later your servicer runs an escrow analysis and your payment goes up — sometimes substantially — and you cannot work out what changed, because the house did not.
What changed is that the previous owner's property tax protections stopped applying, and yours had not started yet.
Texas Tax Code section 11.13 sets out the residence homestead exemptions. The main ones:
Individual taxing units may also adopt their own optional exemptions, so the total varies by where you live. The school district exemption is normally the one that moves the number the most.
Texas Tax Code section 23.23 limits how fast the appraised value of a residence homestead can climb. An appraisal office may increase the appraised value for a tax year to no more than the lesser of:
Two details make this matter enormously to a new buyer.
The cap is tied to the owner, and it resets. Section 23.23(c) provides that the limitation "takes effect as to a residence homestead on January 1 of the tax year following the first tax year the owner qualifies the property for an exemption under Section 11.13," and expires on January 1 of the first tax year that neither that owner nor their spouse or surviving spouse qualifies.
In plain terms: a seller who owned for fifteen years may have an appraised value far below market because the cap held it down year after year. When they sell, that protection ends. The property can be appraised at market value, and you do not get cap protection until the year after you first qualify.
New improvements are excluded. "New improvement" means an improvement made after the most recent appraisal that increases market value and was not included in the prior year's appraised value. Repairs and ordinary maintenance do not count — so fixing a roof is not a new improvement, but adding a room is.
Section 11.42(a) sets the general rule: eligibility for an exemption is determined by the claimant's qualifications on January 1, and a person who does not qualify on January 1 may not receive the exemption that year.
There is an important exception for buyers. Section 11.42(f) provides that a person who acquires property after January 1 may receive a section 11.13 exemption — other than the age-65 or disability exemptions under 11.13(c) and (d) — for the applicable portion of that tax year, immediately on qualification, if the preceding owner did not receive the same exemption for that tax year.
That last clause is the catch. If the seller already claimed the homestead exemption for the year you bought, you cannot also claim it for that same year. You wait for the following January 1.
Section 23.23(c-1) then treats an owner who receives the exemption under 11.42(f) as having qualified as of January 1 of the tax year following acquisition — which is when the cap begins.
If your loan has an escrow account, your servicer collects one twelfth of the estimated annual tax each month. At closing, that estimate is often built on the most recent available tax figure — which may still reflect the seller's exemption and their capped value.
When the appraisal district reassesses without the seller's protections and the actual bill arrives higher, two things happen at once: the servicer has to pay a larger bill than it collected for, and it has to raise your monthly collection going forward to cover the next year plus the shortfall. That combination is why the increase can feel disproportionate.
None of this is a mistake by anyone. It is the predictable result of a tax estimate built on the prior owner's status.
For county-level financing limits, see our Texas loan limits guide, and for assistance programs, the Texas down payment assistance guide. If you already own and are considering pulling equity out, note that Texas has its own constitutional rules — see our post on Texas cash-out refinance rules.
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No. The exemption belongs to the owner who qualified for it, not to the property. You must apply for your own homestead exemption with the county appraisal district once you qualify.
The prior owner's 10% appraisal cap ended when they sold, so the appraisal district can reassess at market value, and the cap does not protect you until January 1 of the tax year following the first year you qualify for a homestead exemption.
Sometimes. Under Tax Code section 11.42(f), a buyer who acquires after January 1 may receive the general homestead exemption for the applicable portion of that year, but only if the previous owner did not already receive the same exemption for that tax year.
Section 11.13 provides $3,000 of assessed value for county purposes and $140,000 of appraised value for school district taxes, with an additional $60,000 school district exemption for owners who are 65 or older or disabled. Individual taxing units may adopt further optional exemptions.
No. The cap calculation adds the market value of all new improvements on top of the capped amount. A new improvement is one that increases market value and was not in the prior year's appraised value; repairs and ordinary maintenance do not count.
This article is for general information only and is not legal, tax, or financial advice. State law and investor guidelines change; confirm current requirements with a licensed professional before making decisions. Xpert Home Lending, Inc. is an Equal Housing Lender.