Somewhere in a drawer, most DFW homeowners still have the appraisal notice that arrived this spring, and most of them noticed the same odd thing: it lists two different values for the same house. One line says market value. Another says appraised value, and it is often tens of thousands of dollars lower. Neither is a typo, and the gap between them is one of the most valuable features in the Texas property tax system.
Here is what each number means, how the 10 percent homestead cap creates the difference, and which value actually decides what you pay in October.
The two values, in plain English
Market value is the appraisal district’s estimate of what your home would have sold for on January 1 of this year. Under state law, the Texas Comptroller explains, taxable property must be valued at 100 percent of market value as of that date. Market value follows the market: it can jump 20 percent in a hot year or fall in a soft one, with no limit in either direction.
Appraised value, sometimes called the capped value, is different. For a home with a homestead exemption, state law limits how fast that number can climb: no more than 10 percent per year, plus the value of any new improvements you added, no matter what the market did. That limit comes from Tax Code Section 23.23, and it is why the second number on your notice can sit well below the first after a few strong years in the DFW housing market.
How the cap plays out on a real notice
Say your appraised value last year was $300,000 and the market pushed your home’s market value to $354,000 this year, an 18 percent jump. With the cap, this year’s appraised value can rise only to $330,000, which is last year’s figure plus 10 percent. The notice will show market value at $354,000, appraised value at $330,000, and the $24,000 difference as your cap savings. The Dallas Central Appraisal District walks through this exact mechanic in its estimated-value FAQ.
One wrinkle worth understanding: the cap does not erase value growth, it defers it. If the market cools and your market value goes flat, your appraised value keeps climbing up to 10 percent a year until the two numbers meet. That is why your appraised value can rise in a year when your market value did not. The system is catching up, and the catch-up is legal and normal.
Who gets the cap, and when it starts
The cap belongs to homes with a residence homestead exemption, the one you file for the house you actually live in. It does not apply to rental houses, second homes or commercial property. And there is a timing rule that surprises new buyers: the cap takes effect on January 1 of the year after the first full year you qualify for the homestead exemption. Buy a house this year, file the exemption, and your first capped year arrives later than you might hope, which is why a new owner’s appraised value can leap to full market value once after a purchase before the brake engages.
Filing the exemption is free and is done once with your appraisal district, DCAD for Dallas County property or the Tarrant Appraisal District on the other side of the county line. Ignore any mailer offering to file it for a fee; the Comptroller’s office publishes the exemption rules, and no company can get you a better cap than the free application does.
Which number your tax bill actually uses
When the tax offices calculate your bill this fall, they start from the appraised (capped) value, not the market value. From there they subtract your exemptions, like the general homestead exemption on school taxes and any over-65 or disability exemptions, and apply each taxing unit’s rate to what is left. So the number to watch on your notice is the appraised value: that, minus exemptions, is the base your city, county, school district and college district will tax.
This is also why two neighbors in identical houses can pay very different taxes. One bought recently and is taxed near full market value; the other has held the homestead for a decade of capped 10 percent steps.
If the numbers look wrong
The regular deadline to protest this year’s value was back in May, so for most homeowners the 2026 numbers are set. But it is a good season to do two checks anyway. First, confirm your homestead exemption is actually on the account; you can look your property up on the DCAD or TAD website in a minute, and a missing exemption means a missing cap. Second, if you spot a genuine error in the record, certain corrections are still possible outside the protest window under the Tax Code’s correction provisions, and next spring’s protest season will come around on schedule.
The two-value notice looks like bureaucratic clutter, but read correctly it is a receipt for money the cap kept in your pocket. For a lot of DFW homeowners this year, that second, smaller number is the best news on the page.
This article was produced with AI assistance and reviewed by a human editor. Figures are linked to their primary sources; where a claim could not be verified from the public record, we say so.
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