December 31, 2026: the tax reset most refis are not modeling.

Since 2024, Texas has capped how fast the appraised value of most non-homestead real property can rise: no more than 20 percent a year, under Tax Code section 23.231. The Legislature built it as a pilot covering the 2024, 2025, and 2026 tax years, for properties under a value threshold the Comptroller indexes each year: 5 million dollars in 2024, 5.16 million in 2025, and 5.32 million dollars for 2026 (Texas Comptroller, 2026).

The pilot expires December 31, 2026. A bill in the last regular session sought to make the cap permanent and did not get there, and the Legislature does not convene in regular session again until January 2027, after the sunset. Unless a special session intervenes, the cap simply lapses, and county appraisal districts have said what happens next in plain terms: beginning with the 2027 tax year, the limitation is no longer in effect (Williamson CAD, 2026).

What that means in practice. A property that has been riding the cap carries two values at the appraisal district: the capped value its taxes are computed on, and the market value the district actually believes. When the cap lapses, that spread can close in a single year. For an owner whose capped value sits well below market, the 2027 tax bill steps up accordingly, and property taxes are usually the largest single line in a DFW operating budget.

For anyone refinancing right now, the underwriting implication is direct. A loan sized on a trailing twelve month expense stack that reflects capped 2025 and 2026 taxes is sized on an expense line that may not exist in 2027. Debt service coverage computed against this year’s taxes can look materially better than the coverage the property will actually produce the year after the loan closes. Capital sources that model taxes at market value will size smaller and be right.

Three things worth doing before year end. Pull your appraisal notice and compare the capped value against the market value; the spread is your exposure. If you are refinancing, model 2027 taxes at the market value, not the capped one, and let the coverage math absorb it now rather than surprise you later. And note that the cap follows the owner, not the property: it applied only after a full calendar year of ownership and resets on a sale, so buyers never inherit it (Texas Comptroller, 2026).

We flag this reset on every DFW file we package. It is not a reason to panic. It is a reason to run the 2027 number now.

The full treatment, including the value walk, the exposure buckets, and the year-end checklist, is in our second research paper. Get it on the resources page.

This note is general information about a Texas statute, not tax or legal advice. Confirm your property’s status with your appraisal district and your tax advisor.