Residential Market Volatility & the 10% Homestead Cap: How to Challenge Hidden Value Increases

Here’s what you need to know about how to challenge property tax increases due to a volatile market:

• The 10% homestead cap protects your primary residence from taxable value increases higher than 10% each year.
• Market volatility can still lead to property tax increases, whether through inflated values, appraisal errors, or even “hidden” but fair increases.
• Always carefully review your appraisal notice and consider protesting your property taxes, even if you believe the value is correct.
• Gill, Denson & Company has the expertise to uncover potential savings that the average homeowner might miss.

How Does the 10% Homestead Cap Work?

The 10% homestead cap is a critical protection for Texas homeowners, limiting annual increases in taxable property value to 10%. The property must be their primary residence, have an active homestead exemption, and remain in the same condition. For example, an increase due to renovations and added value would not be protected. The cap helps homeowners avoid sudden, unaffordable spikes in property taxes as the market changes. However, market volatility and unnoticed appraised value increases can still lead to higher tax bills.

For a deeper dive into how the 10% Texas Homestead Cap Works, check out our previous blog.

How Market Volatility Affects the Cap

Residential market volatility, such as rising home prices, neighborhood developments, or increased demand, can influence your property’s appraised value. However, the homestead cap will protect you from sharp increases in taxable value exceeding 10% per year. The market can also drop from the previous year, and this is where the cap may inadvertently lead to “hidden” increases. Some homeowners may settle into a false sense of security with the cap and not notice their taxable value steadily increasing year after year.

For example:

• If your home’s appraised value was $2,000,000 last year, the maximum it could increase to this year under the cap is $2,200,000 (10% increase), even if county appraisers suggest a $2,500,000 value.
• If the market drops next year, but remains higher than your current capped value, your property taxes will still increase to “catch up” to the market value.

Understanding these nuances is key to ensuring the 10% cap is applied fairly to your property. It’s best not to let even one year go by without checking that you’re able to protest for a lower taxable value. Market volatility can easily lead to inflated values, which push your homestead cap higher over time.

How to Challenge Property Tax Increases

Even with the homestead cap, you may still face unfair property tax increases due to market volatility or appraisal errors. If you suspect your taxable value is incorrect, here’s how to challenge it:

1. Review Your Appraisal Notice: Carefully check the Notice of Appraised Value for errors in property details, such as incorrect square footage, room counts, or condition assessments.

2. Compare with Neighboring Properties: Review recent sales of similar homes in your area to determine whether your appraisal accurately reflects the market.

3. Gather Evidence: Collect documentation, such as photos, repair receipts, or independent appraisals, to support your case.

4. File a Protest: Submit a formal protest to your county’s appraisal review board before the deadline. Be sure to include your evidence and clearly explain why you believe the market value is incorrect.

*It’s important to note here that in a value protest, we appeal the county-assigned market value and not the assessed value. For a deeper explanation of the difference in these values, see our co-founder Richie Gill discuss it here.

5. Consider Professional Help: The property tax experts at Gill, Denson & Company can identify overlooked discrepancies and strengthen your protest, increasing your chances of a successful appeal.

Acting early and being thorough can make a significant difference in reducing your tax burden.

Don’t let the “hidden” value increases cost you thousands. Let our experts guide you through the process and secure the tax relief you deserve. Contact us today to learn how we can assist with your residential property tax appeal and ensure your homestead cap is applied properly.