Market Value vs Appraised Value: What Texas Homeowners Need to Know
When you receive your Notice of Appraised Value from your county appraisal district (CAD), you'll see several different numbers. Understanding what each value means—and why they often differ—is essential for managing your Texas property taxes.
No, a tax assessment is not the same as an appraisal. In Texas, the appraisal is the county's estimate of your property's market value. The assessment (assessed value) is that appraised value after applying the 10% homestead cap. Market value is what your home would actually sell for. Taxable value is what you pay taxes on after exemptions.
The Four Property Values Explained
Texas property tax involves four related but distinct values. Here's what each means:
| Value Type | Definition | Who Determines It |
|---|---|---|
| Market Value | Price your home would sell for on the open market | Buyers and sellers |
| Appraised Value | County's estimate of market value as of January 1 | County Appraisal District |
| Assessed Value | Appraised value after the 10% homestead cap is applied | County Appraisal District |
| Taxable Value | Assessed value minus exemptions (homestead, over-65, etc.) | County Appraisal District |
Your property tax bill is calculated using the taxable value, not the market or appraised value. This is why understanding all four terms matters.
What Is Market Value (Fair Market Value)?
Market value (also called fair market value or FMV) is the price a property would sell for in an arm's-length transaction where:
- Both buyer and seller are informed about the property
- Neither party is under pressure to buy or sell
- The property has reasonable exposure time on the market
- Payment is made in cash or equivalent
Market value is determined by what actual buyers will pay, based on factors like:
- Square footage and lot size
- Number of bedrooms and bathrooms
- Year built and overall condition
- Location, school district, and neighborhood amenities
- Recent comparable sales ("comps") in the area
Important: Texas is a non-disclosure state, meaning sale prices aren't publicly recorded. This makes it harder for appraisal districts to know actual market values—and easier for them to overvalue your property.
What Is Appraised Value?
The appraised value is your county appraisal district's estimate of your property's market value as of January 1 each year.
Under Texas Tax Code Section 23.01, appraisal districts must appraise property at market value. However, there's a critical distinction:
County appraisal districts don't actually appraise your home. Despite the name, they use mass appraisal methods—computer models that estimate values for thousands of properties at once based on:
- Public records (square footage, lot size, year built)
- Neighborhood sales trends
- Property classifications
Mass appraisal cannot account for individual property conditions like:
- Deferred maintenance or needed repairs
- Foundation issues or roof damage
- Outdated kitchens or bathrooms
- Errors in public records
This is why the county's appraised value often doesn't match your home's true market value—and why property tax protests are so common in Texas.
What Is Assessed Value?
Assessed value (sometimes called "capped value" or "limited value") is your appraised value after the 10% homestead cap is applied.
If you have a homestead exemption, Texas law limits how much your assessed value can increase each year—even if the appraised value jumps significantly.
The 10% Homestead Cap Explained
Under Texas Tax Code Section 23.23, your homestead's assessed value cannot increase by more than 10% per year (plus the value of any new improvements).
Example:
| Year | Market Value | Appraised Value | 10% Cap Limit | Assessed Value |
|---|---|---|---|---|
| 2025 | $400,000 | $400,000 | N/A (first year) | $400,000 |
| 2026 | $480,000 | $480,000 | $440,000 | $440,000 |
| 2027 | $500,000 | $500,000 | $484,000 | $484,000 |
In this example, even though market value jumped 20% in 2026, the homeowner's assessed value only increased 10% due to the cap.
Key points about the 10% cap:
- Starts January 1 of the year after you qualify for homestead exemption
- Resets when ownership changes or property stops qualifying as homestead
- Does NOT apply to new construction or improvements
- Does NOT cap the market value—only the assessed value
- Does NOT apply to non-homestead properties (rentals, second homes)
Learn more about how capped appraisal values work.
What Is Taxable Value?
Taxable value is your assessed value minus any exemptions you qualify for. This is the number your tax bill is actually based on.
Calculation:
Taxable Value = Assessed Value - Exemptions
Example for a homeowner age 65+ with a $500,000 assessed value:
| Component | Amount |
|---|---|
| Assessed Value | $500,000 |
| Less: General Homestead Exemption (school) | -$100,000 |
| Less: Over-65 Exemption (school) | -$10,000 |
| Less: Local Exemptions (varies) | -$40,000 |
| Taxable Value | $350,000 |
Your actual tax bill = Taxable Value × Tax Rate
Real-World Example: How It All Works Together
Let's follow a Houston homeowner through the entire process:
Sarah's home:
- Purchase price (2023): $450,000
- She applied for homestead exemption in 2023
2024 Values:
- Market value: $450,000
- Appraised value: $450,000
- Assessed value: $450,000 (cap starts next year)
- Homestead exemption: $100,000
- Taxable value: $350,000
2025 Values:
- Market value rises to: $520,000
- County appraised value: $520,000
- 10% cap limit: $495,000 ($450,000 + 10%)
- Assessed value: $495,000 (capped)
- Homestead exemption: $100,000
- Taxable value: $395,000
2026 Values:
- Market value rises to: $550,000
- County appraised value: $550,000
- 10% cap limit: $544,500 ($495,000 + 10%)
- Assessed value: $544,500 (capped)
- Homestead exemption: $100,000
- Taxable value: $444,500
Notice how Sarah's taxable value increased much more slowly than the market value due to the homestead cap and exemption working together.
2026 Legislative Updates
Several changes affect Texas property values in 2026:
Current Exemptions (2026)
- School district homestead exemption: $100,000 (increased from $40,000 in 2023)
- Over-65/Disabled additional exemption: $10,000 for school taxes
- Senior total school exemption: Up to $200,000 when combined with general homestead
Pending Changes
A proposed constitutional amendment would increase the general homestead exemption from $100,000 to $140,000 if approved by voters in November 2025. This would take effect January 1, 2026.
Non-Homestead Properties
The temporary 20% cap for non-homestead properties (commercial, rental, second homes) expires December 31, 2026 unless extended by the Legislature.
Assessed Value vs Market Value: Key Differences
One of the most common questions Texas homeowners ask is how assessed value compares to market value. Here's the direct comparison:
| Market Value | Assessed Value | |
|---|---|---|
| What it represents | What a buyer would pay for your home | Your appraised value after the 10% homestead cap |
| Who determines it | The real estate market (buyers and sellers) | County Appraisal District |
| Can it decrease? | Yes, based on market conditions | Yes, if appraised value drops below the cap |
| Used for taxes? | No (indirectly, through appraised value) | Yes, it's the starting point before exemptions |
| Changes annually? | Yes, based on supply and demand | Limited to 10% increase per year with homestead |
The bottom line: Your assessed value is almost always lower than market value if you have a homestead exemption, because the 10% annual cap prevents it from keeping pace with rapid market appreciation. This is one reason homestead exemptions are so valuable in Texas.
For a detailed breakdown of how assessed value relates to appraised value, see the 10% homestead cap section above.
Is Tax Assessment the Same as Appraisal?
No. While the terms are sometimes used interchangeably in casual conversation, they refer to different things in Texas property tax law:
- Appraisal (appraised value): The county appraisal district's estimate of your property's market value as of January 1. This is what the district believes your home would sell for.
- Assessment (assessed value): The value used as the starting point for calculating your tax bill. For homestead properties, assessed value is the appraised value limited by the 10% annual cap. For non-homestead properties, the appraised value and assessed value are the same.
The distinction matters because you protest the appraised value, but you pay taxes based on the assessed value (minus exemptions). Lowering the appraised value through a protest reduces the assessed value as well.
What Is the Difference Between Assessed Value and Appraised Value?
Appraised value is what the county says your home is worth on the open market. Assessed value is the number actually used to calculate your tax bill—and it may be lower than the appraised value if the 10% homestead cap kicks in.
Here's how they diverge over time:
| Year | Appraised Value | 10% Cap Limit | Assessed Value | Difference |
|---|---|---|---|---|
| 2024 | $400,000 | N/A (first year) | $400,000 | $0 |
| 2025 | $460,000 | $440,000 | $440,000 | $20,000 |
| 2026 | $500,000 | $484,000 | $484,000 | $16,000 |
In this example, the homeowner saves taxes on $20,000 of value in 2025 and $16,000 in 2026 thanks to the cap creating a gap between appraised and assessed values.
Key takeaway: Even if your assessed value is capped, you should still protest the appraised value. A lower appraised value keeps the cap gap from closing and provides compounding savings in future years.
Common Misconceptions
"My neighbor's home sold for less, so my value should be lower"
Not necessarily. Sale prices are one factor, but appraisal districts also consider property characteristics, condition differences, and timing. However, you can use comparable sales as evidence in a protest.
"If I protest, the county might raise my value"
False. Texas law prohibits appraisal districts from raising your value solely because you filed a protest. The Appraisal Review Board (ARB) can only lower or maintain your value during a protest hearing.
"Lowering my appraised value will hurt my home's resale price"
False. The county's appraised value has no effect on what buyers will pay. Market value is determined by actual market conditions, not tax assessments. In fact, lower property taxes can make your home more attractive to buyers.
"My value is capped, so there's no point in protesting"
False. You should always protest the market value, even if your assessed value is capped. Here's why:
- A lower market value means your cap has more room before it catches up
- Future assessed values will rise from a lower base
- If you lose your homestead (sell, rent out, etc.), the market value becomes your new starting point
"Online estimates (Zillow, Redfin) are accurate"
These are algorithm-generated estimates, not appraisals. They can be off by 10-20% or more and are not accepted as evidence by appraisal districts.
When to Protest Your Property Tax Value
You should consider protesting if:
- Your appraised value increased significantly
- Comparable homes in your area sold for less than your appraised value
- Your property has condition issues not reflected in the appraisal
- There are errors in your property records (wrong square footage, bedroom count, etc.)
- Similar properties are assessed lower than yours (unequal appraisal)
Learn more in our complete Texas property tax protest guide.
Frequently Asked Questions
What's the difference between appraised value and assessed value in Texas?
Appraised value is the county's estimate of your property's market value. Assessed value is the appraised value after the 10% homestead cap is applied. For homestead properties owned more than one year, assessed value is often lower than appraised value due to the cap.
What is the difference between assessed value and market value?
Assessed value is a tax-specific number calculated by your county appraisal district. For homestead properties, it's your appraised value limited by the 10% annual cap. Market value is what your home would actually sell for on the open market. In Texas, assessed value is typically lower than market value because the homestead cap slows how fast it can rise.
Can the ARB increase my appraised value if I protest?
No. Under Texas law, the Appraisal Review Board cannot raise your value simply because you filed a protest. The worst outcome is that your value stays the same.
Should I protest if my appraised value is already capped?
Yes. Protesting the market value is still beneficial because it keeps your future assessed values lower. The cap is based on the previous year's assessed value, so reducing market value now provides long-term savings.
Why is my appraised value higher than what I paid for my home?
This can happen if the appraisal district hasn't updated their records with your sale price (Texas is a non-disclosure state), or if they believe market conditions have changed since your purchase. You can use your closing statement as evidence in a protest.
Does lowering my appraised value affect my home's selling price?
No. The county's appraised value has no impact on market value or what buyers will pay. Market value is determined by supply, demand, and comparable sales—not tax assessments.
How often should I protest my property taxes?
Every year. Texas law allows annual protests, and values can change annually. Even if you protested last year, this year's value may be higher than justified.
Is tax assessment the same as appraisal?
No. In Texas, the appraisal is the county's estimate of your property's market value. The assessment (assessed value) is that appraised value after applying the 10% homestead cap. For non-homestead properties, the appraised and assessed values are the same. See the full explanation above.
What is the difference between assessed value and appraised value?
Appraised value is the county appraisal district's estimate of what your property is worth on the open market as of January 1. Assessed value is the number actually used to calculate taxes—it equals the appraised value unless the 10% homestead cap limits it to a lower amount. Over time, the gap between these two values can grow significantly for homestead properties. See the comparison table above.
Get Help With Your Property Tax Protest
Understanding the difference between market value, appraised value, assessed value, and taxable value is the first step toward lower property taxes. If your county's appraised value doesn't reflect your home's true worth, you have the right to protest.
Ballard Property Tax Protest helps Texas homeowners reduce their property tax burden through evidence-based protests. We handle everything—from filing to ARB hearings—so you don't have to.
No reduction, no fee.