Market Value vs Appraised Value for Texas Property Taxes
Quick answer: On a Texas appraisal notice, market value is the appraisal district's estimate of what your property would sell for on January 1. Appraised value is the value used for taxes: the market value, limited by the 10% homestead cap if you have a homestead exemption. Without a cap, the two are equal. Exemptions then reduce appraised value to taxable value.
Every spring your county appraisal district (CAD) sends a Notice of Appraised Value with several numbers on it. They look similar, but they are not interchangeable, and knowing which is which tells you what to protest and why your bill moves the way it does. For other terms on the notice, see our Texas property tax glossary.
The Values on Your Texas Property Tax Notice
| Value | What it means | Who sets it | Legal basis |
|---|---|---|---|
| Sale price (true market value) | What a buyer actually pays you | Buyers and sellers | None (private sale) |
| Market value | The CAD's estimate of your sale price as of January 1 | Appraisal district | Tax Code 1.04(7), 23.01 |
| Appraised value | Market value after any limit, such as the 10% homestead cap | Appraisal district | Tax Code 23.23 |
| Assessed value | Appraised value times the assessment ratio, which is 100% in Texas | Set by law | Tax Code 26.02 |
| Taxable value | Appraised value minus your exemptions, figured separately for each taxing unit | Appraisal district, using exemptions you filed | Tax Code Chapter 11 |
Your tax bill is each taxing unit's taxable value times that unit's rate. You cannot protest the tax rate, but you can protest the market value and make sure every exemption is on file, which is why the difference between these numbers matters.
What the labels look like in practice: Harris, Fort Bend and Dallas appraisal districts show a "market value" and a lower "appraised" or "capped" value on homesteads that are under the cap. Some districts, websites and real estate agents call the capped figure "assessed value." When you read your notice, the question is the same: which number is the CAD's estimate of your sale price (market value), and which number is limited by the cap (appraised value)?
What Is Market Value?
The Texas Tax Code defines market value as the price a property would sell for in cash, or its equivalent, under prevailing market conditions, if:
- it was exposed for sale on the open market with reasonable time to find a buyer,
- buyer and seller both know the property's uses and any restrictions on it, and
- both want the best deal and neither can take advantage of the other's situation.
That is the same idea as "fair market value" in real estate. The difference is who is estimating it. When you sell, the market sets the price. For taxes, your appraisal district estimates it once a year, as of January 1, usually without seeing the inside of your home.
Appraisal districts value hundreds of thousands of properties at once using computer models, a process called computer-assisted mass appraisal (CAMA). The models use public records (square footage, lot size, year built, quality class) and neighborhood sales trends. They can't see a cracked foundation, a 1990s kitchen, a busy road behind the fence or an error in your square footage. That is why the CAD's market value and your home's real market value often don't match.
Texas also doesn't require sale prices to be made public, so your appraisal district may not know what you or your neighbors actually paid. Recent purchase prices and comparable sales are some of the strongest protest evidence for that reason.
What Is Appraised Value?
Appraised value is the value your taxes start from. For most properties it equals market value. It is lower than market value only when a legal limit applies.
The 10% Homestead Cap (Tax Code 23.23)
If the home is your residence homestead, Tax Code Section 23.23 says the appraised value for a year can't exceed the lesser of:
- the market value, or
- last year's appraised value, plus 10% of last year's appraised value, plus the market value of any new improvements.
Key rules:
- It starts in the second year. The cap takes effect January 1 of the year after you first qualify for the homestead exemption. In your first homestead year, appraised value equals market value.
- It doesn't transfer. A buyer does not inherit the seller's capped value. The cap restarts with the new owner.
- It doesn't cover new improvements. An addition or a pool is added at market value on top of the capped amount. Ordinary repairs and maintenance don't count as new improvements.
- It doesn't cap market value. The CAD still records the full market value every year.
- It applies only to homesteads. Rentals, second homes, land and commercial property don't get it.
Read more in our guide to capped appraisal value in Texas.
The 20% Circuit Breaker for Non-Homestead Property (Tax Code 23.231)
Since 2024, non-homestead real property (rental homes, second homes, small commercial buildings and vacant lots) has had a separate limit called the circuit breaker. Under Tax Code Section 23.231, the appraised value can't rise more than 20% a year, plus new improvements, if the property's appraised value was at or below a threshold when it first qualified.
| Detail | Rule |
|---|---|
| Threshold | $5 million for 2024, adjusted each year by the Comptroller for inflation. Appraisal districts list $5,320,000 for 2026. |
| When it starts | January 1 of the year after you have owned the property on a January 1 |
| What's excluded | Homesteads (they get the 10% cap) and land under special appraisal, such as agricultural (1-d-1) or timber valuation |
| Do you apply? | No. The appraisal district applies it automatically. |
| When it ends | The statute says it expires December 31, 2026. Unless the Legislature extends it in the 2027 session, it won't limit 2027 values. |
If you own a rental or other non-homestead property, protesting each year is the main check on large increases, and even more so if the circuit breaker lapses. See our guide to rental property tax protests.
What Is Assessed Value?
In most states, assessed value is a percentage of market value. Texas doesn't work that way. Tax Code Section 26.02 prohibits assessing property at a fraction of its value and requires assessment at 100% of appraised value. So in Texas:
Assessed value = appraised value.
When a Texan says "assessed value," they usually mean the capped value on a homestead. That's fine as shorthand. Just know that the number legally limited by the cap is the appraised value, and the number your bill is calculated from is the taxable value.
What Is Taxable Value?
Taxable value is your appraised value minus the exemptions each taxing unit gives you. Because school districts, counties, cities and special districts offer different exemptions, you have a different taxable value for each one.
Taxable value = appraised value - exemptions
Example: school taxable value on a $500,000 appraised homestead
| Under 65 | Age 65 or older | |
|---|---|---|
| Appraised value | $500,000 | $500,000 |
| General homestead exemption (school) | -$140,000 | -$140,000 |
| Over-65 exemption (school) | n/a | -$60,000 |
| School taxable value | $360,000 | $300,000 |
The $140,000 school homestead exemption and the $60,000 over-65 and disabled exemption were approved by Texas voters in November 2025 (Propositions 13 and 11) and apply starting with the 2025 tax year. Cities, counties and special districts may add a local homestead exemption of up to 20% of appraised value (at least $5,000). See our Texas homestead exemption guide for how to apply.
Example: How Market, Appraised and Taxable Value Change Over Time
Sarah buys a Houston-area home in early 2025 for $450,000, moves in and files her homestead exemption (Form 50-114) that year, so 2025 is her first homestead year. (These values are an illustration, not a real account.)
| Tax year | CAD market value | 10% cap limit | Appraised value | School exemption | School taxable value |
|---|---|---|---|---|---|
| 2025 (first homestead year) | $450,000 | No cap yet | $450,000 | -$140,000 | $310,000 |
| 2026 | $520,000 | $495,000 | $495,000 | -$140,000 | $355,000 |
| 2027 | $560,000 | $544,500 | $544,500 | -$140,000 | $404,500 |
The market value rose 24% over two years, but Sarah's appraised value rose 21%, and each year's increase stopped at 10%. Her 2026 cap limit is $450,000 plus 10%. Her 2027 cap limit is $495,000 plus 10%, because the cap builds on last year's appraised value, not market value.
What a Protest Does in This Example
Say Sarah protests her 2027 market value of $560,000:
- The ARB lowers market value to $550,000. Her appraised value stays $544,500, because market value is still above the cap limit. This year's bill doesn't change, but the CAD's record of her home's value is lower going into 2028.
- The ARB lowers market value to $520,000. Her appraised value drops to $520,000 (the lesser of market value and the cap limit). Her school taxable value falls by $24,500, and her 2028 cap limit is figured from $520,000 instead of $544,500.
Harris Central Appraisal District explains the same rule: the market value must be reduced below the capped value before the appraised value will change. That's why your protest evidence should aim at the market value, and why a strong protest pays off this year and in future years.
Do You Protest Market Value or Appraised Value?
You protest the appraisal district's market value, and you can also protest that your value is unequal compared with similar homes. The appraised value follows from the market value and the cap, so a lower market value is how you get a lower appraised value.
Good evidence includes:
- Comparable sales of similar homes near January 1 that sold for less than your market value. See how comparable properties lower your taxes.
- Condition problems the CAD can't see: foundation, roof, plumbing, flooding, outdated finishes, with photos and repair estimates.
- Record errors: wrong square footage, bedroom or bathroom count, lot size, pool or garage.
- Unequal appraisal: similar homes nearby appraised at lower values per square foot.
The deadline is May 15 or 30 days after your notice is mailed, whichever is later. For 2027, May 15 falls on a Saturday, so the deadline moves to Monday, May 17, 2027. See all Texas property tax protest deadlines and our step-by-step protest guide.
Are Texas County Appraisals Lower Than Market Value?
Sometimes, but you shouldn't count on it. The law requires appraisal districts to appraise property at 100% of market value as of January 1, and the Texas Comptroller checks each district's values against sales in its school district property value study at least once every two years. So the CAD's market value is meant to land at full market value, not below it.
Two things make the numbers you see differ:
- The homestead cap. On a home you've owned as a homestead for a few years in a rising market, appraised value is often well below market value, but that's the cap at work, not a low appraisal.
- Mass appraisal error. Models built on neighborhood averages overvalue some homes and undervalue others. If your home has problems the model can't see, its market value is more likely to be too high.
County Appraisal vs Bank Appraisal
| County (tax) appraisal | Lender (bank) appraisal | |
|---|---|---|
| Purpose | Set the value for property taxes | Support a mortgage loan |
| Who does it | Appraisal district staff using mass appraisal models | A licensed or certified appraiser hired for your loan |
| Inspection | Usually none inside the home | Usually a walkthrough of the home |
| Valuation date | January 1 of the tax year | The date of inspection |
| Covers | Every property in the county, every year | One property, one time |
| Can you challenge it? | Yes, through a protest to the appraisal review board | Through the lender's review process |
A recent bank appraisal or purchase price that is lower than your CAD market value can be useful protest evidence. In a protest of a home valued at $1 million or less, an independent appraisal delivered on time can also shift the burden of proof to the appraisal district under Tax Code 41.43.
Common Misconceptions
"My value is capped, so there's no point in protesting." False. The cap sets a ceiling, not a floor. A lower market value lowers future cap limits, protects you if you sell or lose the homestead, and lowers this year's bill whenever it drops below the capped amount.
"Online estimates prove my value." Zillow and Redfin estimates are algorithms, not appraisals. Appraisal districts and review boards give far more weight to actual comparable sales, photos and documentation.
"A lower appraisal will hurt my resale price." False. Buyers pay based on the market, not on the CAD's number.
"Property taxes are based on market value, so nothing can be done." Your bill depends on market value, the cap, your exemptions and your tax rates. You control two of those: your exemptions and whether you protest.
Sources
- Market value, appraised value and assessed value definitions: Texas Tax Code, Section 1.04
- Appraisal at market value as of January 1; mass appraisal must comply with USPAP: Texas Tax Code, Section 23.01
- 10% homestead cap: Texas Tax Code, Section 23.23
- 20% circuit breaker and its December 31, 2026 expiration: Texas Tax Code, Section 23.231
- $5,320,000 circuit breaker threshold for 2026: Bexar Appraisal District, Circuit Breaker Limitation
- Assessment at 100% of appraised value: Texas Tax Code, Section 26.02
- Capped value rules and first homestead year: Harris Central Appraisal District, Capped Appraisal Values FAQs
- Market value vs homestead cap value: Fort Bend Central Appraisal District, What Is the Difference Between the Market Value and the Appraised Value
- School district property value study: Texas Comptroller, School District Property Value Study
- Homestead and over-65 exemptions: Texas Comptroller, Property Tax Exemptions
- Burden of proof with an independent appraisal: Texas Tax Code, Section 41.43
Get Help With Your Property Tax Protest
If your appraisal district's market value is higher than what your home would really sell for, you have the right to protest it every year.
Ballard Property Tax Protest builds evidence-based protests for Texas homeowners and handles everything from filing to the ARB hearing. There's no upfront cost: you pay nothing unless we lower your taxes.
