Texas 20% Appraisal Cap for Commercial Property Expires in 2026

There’s a deadline that matters more than May 15 for Texas commercial property owners, and almost nobody is talking about it: the 20% appraisal cap on non-homestead properties expires December 31, 2026 unless the Texas Legislature acts to extend it.

If you own commercial property valued at $5.32 million or less — the 2026 CPI-adjusted threshold — this cap has been quietly protecting you since 2024. It limits how much your assessed value can increase in a single year. When it expires, that guardrail disappears. Appraisal districts will have no ceiling on how much they can raise your value in one shot, and many have been waiting for exactly that moment.

What the 20% Cap Actually Does

The circuit breaker limitation was created by Proposition 4 in November 2023. It applies to non-homestead real property — commercial buildings, investment properties, rental properties, and any residential property without a homestead exemption — valued below a CPI-indexed threshold.

Plain English: the appraisal district can still determine what they think your property is worth at full market value. But if that full market value represents more than a 20% increase from last year’s assessed value, they can only move your assessed value up by 20%. The rest of the gap stays on their books as the difference between “market value” and “appraised value.”

Tax Year	Value Threshold	Max Assessed Value Increase
2024	$5,000,000	20%
2025	$5,160,000	20%
2026	$5,320,000	20%
2027	No cap (unless extended)	Unlimited

This is intentionally different from the homestead cap, which limits increases to 10% per year and is permanent. The commercial cap was authorized for only three years. The Legislature has to vote to extend it — and as of April 2026, that extension has not been finalized.

The Cap Gap: What’s Sitting on Your Property’s Books

Here’s what most commercial property owners don’t fully understand: if the cap has been protecting you, your county appraisal district has almost certainly been tracking a “market value” that’s higher than your current assessed (capped) value. That difference — the cap gap — is what the district plans to capture in 2027.

A concrete example: Your office building had a market value of $3.5 million in 2023. The district believes it appreciated to $5.1 million by 2025. With the 20% cap, here’s how your assessed value was allowed to move:

Year	District’s Market Value	Your Capped Assessed Value	Cap Gap
2023	$3,500,000	$3,500,000	$0
2024	$4,400,000	$4,200,000 (+20%)	$200,000
2025	$5,100,000	$5,040,000 (+20%)	$60,000
2026	$5,200,000	$5,200,000 (cap closes)	$0
2027 (no cap)	$5,500,000	$5,500,000	$0

In this scenario, by 2026 the cap has mostly closed on its own because the market value increase slowed. But in high-growth corridors — the I-35 corridor in Travis County, the Alliance area in Tarrant County, industrial zones in Harris County — the gaps are much larger and won’t close naturally.

To find your cap gap: request your full property record from your county appraisal district. Compare the “market value” line to the “appraised value” (capped value) line. The difference is your exposure for 2027 if the cap expires.

Why 2026 Is the Most Important Year to Protest

This is the last year the cap applies. That makes your 2026 protest uniquely valuable.

Here’s the mechanics: when you win a protest and get your assessed value reduced, that lower number becomes the baseline for the following year’s appraisal. If the cap expires in 2027 and the district plans to capture any remaining gap between market value and assessed value, starting from a lower 2026 assessed value means they have less gap to close.

Winning a 12% reduction on your 2026 assessed value doesn’t just save you money this year. It sets a lower floor for what the district can assess in 2027 — even without the cap.

I’ve been advising commercial clients all year to treat 2026 as the most important protest cycle in recent memory. A successful protest now creates a compounding benefit that extends beyond just this tax year.

What to Do Before the Cap Expires

Step 1: File your 2026 protest by May 15. Don’t wait. If your 2026 assessed value is inflated — or even close to what the district’s market value estimate suggests — protest it aggressively. Bring comparable sales, income data, and condition documentation. This is not the year to skip.

Step 2: Pull your property’s full value history. Request it from your county CAD or access it online. Look at the difference between the “market value” and “appraised value” (capped value) columns. If that gap is more than 10%, you have real 2027 exposure.

Step 3: Document your property’s actual condition. Gather evidence now that supports a lower market value. Deferred maintenance records, actual lease rates (not asking rates), vacancy history, and recent comparable sales of similar properties. You’ll use this for your 2026 protest and you’ll want it ready for 2027.

Step 4: Model your 2027 tax exposure. Take the district’s current market value estimate, remove the cap, and calculate what your tax bill looks like if that number sticks. At a 2.1% effective rate, a $600,000 jump in assessed value costs you an extra $12,600 per year. That’s the number you’re trying to prevent or minimize.

Will the Legislature Extend the Cap?

As of April 2026, the Texas Legislature is in session and property tax reform is on the agenda. The commercial real estate industry, including the Texas Association of Realtors and NAIOP, has been lobbying for an extension. There is genuine political support for it — legislators from fast-growing suburban counties have heard directly from commercial property owners.

But “probably” doesn’t protect your balance sheet. The legislative calendar is tight, there are competing priorities, and nothing is guaranteed until it’s signed into law.

The correct strategy: assume the cap is gone, protest aggressively in 2026, lower your baseline, and be pleasantly surprised if the Legislature acts. Don’t count on it.

The Compounding Cost of Not Acting

Missing the 2026 protest cycle isn’t just a one-year mistake — it’s potentially a multi-year mistake with compounding consequences. Your 2026 assessed value becomes the floor that 2027’s unlimited increase builds from. A low 2026 baseline is the best hedge you have against whatever happens when the cap expires.

On a $4 million commercial property at a 2.1% effective rate, a 15% reduction through a successful 2026 protest saves you $12,600 this year. It also means the district’s 2027 starting point is $3.4 million instead of $4 million — a difference that compounds forward.

We handle the entire protest process for commercial property owners across all 254 Texas counties on a 30% contingency fee. If we don’t reduce your value, you pay nothing. Given what’s potentially coming in 2027, there’s never been a more important year to get this right.

Get your free property assessment or read our complete guide on how to protest your commercial property tax in Texas.