Texas's 20% Property Tax Cap Expires in 2026: How to Underwrite Reassessment Risk on Your Next Multifamily Deal

Texas's temporary 20% cap on non-homestead property tax increases is scheduled to expire after the 2026 tax year, and it often does not apply to larger institutional multifamily deals because of its value threshold. Florida resets non-homestead assessments to market value the year after a sale, typically anchored close to the purchase price. This framework shows you how to underwrite the tax jump following closing, before it erodes your year-one NOI.

Why Property Tax Reassessment Catches Buyers Off Guard

Sellers market a property on its trailing tax bill. This number reflects the seller's long-held, under-market assessment, not what you will pay. County appraisal districts factor your transaction into their valuation within months, whether through a disclosed sale price or, in non-disclosure states like Texas, through comparable sales, income data, and broker information, and reassess toward it either way. Your year-one tax expense often lands well above the trailing figure baked into the broker's offering memo.

This gap does real damage. A property taxed at $180,000 per year under the seller's assessment might land at $260,000 to $310,000 once the assessor reassesses to your purchase price. On a deal sized to a tight cap rate, this swing alone erases 40 to 80 basis points of your going-in yield before you touch rent growth or expenses.

How Reassessment Works After a Sale

Reassessment practice varies by market, and the variance is wide enough to change your underwriting outcome. Assessors in high-volume metro counties often trend toward 80% to 95% of the purchase price, but the exact ratio depends on county methodology, the timing of the reassessment cycle, and how active the local appeal environment runs. Low-volume rural markets sometimes show almost no correlation between sale price and the following year's assessment. Treat any single ratio as a starting estimate, not a fixed benchmark. Pull five years of comparable sales and their post-sale assessment history in your target county before you set a tax assumption.

Two states deserve specific attention because they drive a large share of multifamily transaction volume: Texas and Florida.

Step 1: Model the Texas Circuit Breaker Cap Before It Expires

Texas added a temporary circuit breaker limitation covering non-homestead properties valued at $5,320,000 or less for the 2026 tax year, a threshold adjusting annually with the consumer price index. The cap limits the appraised value increase to 20% of the prior year's appraised value plus the value of new improvements. It is scheduled to expire after the 2026 tax year unless the legislature extends it.

Run the numbers both ways depending on your deal size:

Capped Increase Limit = Prior Year Appraised Value x 1.20 + New Improvement Value

Example: a 42-unit workforce housing deal in San Antonio, prior appraised value $4,100,000, purchase price $5,000,000. Under the cap, the maximum appraised value for the first tax year after closing is $4,920,000, not the full $5,000,000 purchase price. Your tax bill still rises, but the cap holds back roughly 16% of the increase you would otherwise face.

The cap does not help you on larger deals. Properties valued above the $5.32 million threshold do not qualify for this protection, and this threshold rules out many 100-plus unit institutional acquisitions, though not all of them, especially in tertiary markets where per-unit values run lower. Deals above the threshold reassess toward full market value with no ceiling, cap or no cap. If your deal sits above the threshold, skip the circuit breaker math and underwrite full reassessment instead. If your deal sits below it and you expect to close after the cap sunsets, underwrite as though the protection does not exist. A deal priced assuming the cap survives past 2026 carries real legislative risk.

Step 2: Build the Florida Non-Homestead Reset Into Year One

Florida runs a different mechanic. Non-homestead properties, including every multifamily rental, carry a 10% annual assessment cap while held by the same owner. This cap resets the moment ownership changes. On January 1 of the year following a sale, the assessed value resets to the assessor's full determination of market value, with no phase-in and no partial protection. This determination typically anchors close to your purchase price, though assessors depart from it for non-arm's-length transactions or where the income approach points to a different number.

Do not underwrite a Florida acquisition using the seller's trailing tax bill escalated by 3% or 5% a year. This approach misses the reset entirely and understates your year-one expense line by a wide margin on any deal purchased above the prior assessed value.

Step 3: Pull the Assessor's Reassessment Pattern for Your County

Before you finalize your pro forma tax line, request the following from the county appraisal district or property appraiser's office:

• Post-sale assessment history for 3 to 5 comparable transactions in the submarket. Calculate the ratio of new assessed value to sale price for each one.
• The current effective millage or tax rate, and whether the taxing authority has a pending rate change or bond referendum likely to raise it further.
• Any exemptions the seller currently holds and will not transfer to you, including agricultural, historic, or affordable housing exemptions adding hundreds of thousands of dollars to your bill once removed.

Apply the average post-sale assessment ratio from your comps to your own purchase price, not the seller's trailing assessment escalated forward. This single adjustment is the difference between a defensible tax line and one unraveling the first time your lender's third-party tax consultant reviews your pro forma.

Step 4: Stress-Test NOI and DSCR Against the New Tax Bill

Run your underwriting twice: once with the seller's trailing tax bill and once with your reassessed estimate. Compare the DSCR and cash-on-cash return under each scenario.

Reassessed Tax Bill = (Purchase Price x Assessment Ratio) x Effective Millage Rate

Example: purchase price $18,000,000, assessment ratio 85% based on submarket comps, effective millage rate 1.9%. Reassessed tax bill equals $18,000,000 x 0.85 x 0.019, or $290,700 per year. If the seller's trailing tax bill sat at $195,000, your year-one NOI absorbs an additional $95,700 in expense the seller's operating statement never showed.

If this adjustment pushes your DSCR below the lender's 1.25x floor or your break-even occupancy above your target threshold, the purchase price needs to come down before you submit an LOI. Do not treat the seller's tax line as a starting point. Treat it as a number you replace before you run a single other calculation.

How MultiVest Engine Handles This

Rebuilding a tax reassessment scenario by hand means pulling comparable sales from the county assessor, calculating a reassessment ratio, and re-running your full pro forma with the adjusted expense line. MultiVest Engine's Scenario Builder lets you enter a reassessment ratio and effective millage rate alongside your deal inputs, then compares the reassessed-tax scenario against the seller's trailing tax bill side by side, showing you the DSCR and cash-on-cash swing instantly.

For deals in Texas or Florida, the platform flags whether your purchase price sits above or below the relevant assessment threshold, so you know in seconds whether a cap applies before you build out the full model. This check alone saves a wasted afternoon underwriting protection your deal never qualifies for.

The Bottom Line

Property tax reassessment is one of the most predictable expense increases in multifamily underwriting, and one of the most commonly missed. Texas's 20% circuit breaker cap protects only deals under $5.32 million and is scheduled to expire after the 2026 tax year. Florida resets non-homestead assessments to market value the first year after a sale, with no phase-in. Pull the actual reassessment pattern from your county's comparable sales, apply it to your purchase price, and rerun your DSCR before you name a number in an LOI. The trailing tax bill on the seller's operating statement is not your tax bill.

References

1. Tactica RES: A Guide to Underwriting Multifamily Property Tax
2. AppealDesk: How Much Can Property Taxes Increase in Texas? 2026 Cap Guide
3. Texas Comptroller: Valuing Property (Circuit Breaker Limitation)
4. Miami-Dade County Property Appraiser: Non-Homestead Cap
5. Florida Statute 193.1555: Non-Homestead Property Assessment and Change of Ownership