How are rental properties taxed differently from a homestead in Texas?

The first difference: no homestead exemption

Texas homestead exemptions attach to a residence homestead — a property the owner owned and occupied as a principal residence on January 1 of the tax year. A rental is not that, so none of the following apply to it (Texas Comptroller, Property Tax Exemptions):

• The $140,000 school district residence homestead exemption, raised from $100,000 by Proposition 13, approved by Texas voters in November 2025 and implemented by SB 4 of the 89th Legislature, effective for tax year 2026.
• The additional $60,000 school district exemption for owners age 65 or older or disabled.
• The local option homestead exemption of up to 20 percent of appraised value that a taxing unit may offer, with a $5,000 minimum.
• The $3,000 residence homestead exemption required from counties that collect a farm-to-market or flood-control tax.

On a rental, the taxable value is the appraised value. Nothing comes off the top.

The over-65 school tax ceiling is in the same category — it freezes school taxes on a residence homestead for a qualifying owner, and it has nothing to offer a rental. In Kendall County, several jurisdictions offer over-65 and disability tax freezes, named by Kendall Appraisal District as the City of Boerne, Boerne ISD, Comfort ISD and Kendall County — all of which are homestead-linked.

The second difference: no 10 percent cap

The 10 percent annual cap on increases in net appraised value applies to properties that already have a homestead exemption. It is the mechanism that keeps a homeowner's taxable value from tracking a fast-rising market in real time.

A rental does not get it. On a non-homestead property the appraised value can move with the market, subject only to the circuit breaker below.

That difference compounds over a hold period. Two identical houses on the same street, one owner-occupied and one rented, can drift meaningfully apart in taxable value over several years of appreciation — and the gap runs against the investor.

The third difference: the circuit breaker, and its expiration date

Tax Code Section 23.231 caps the appraised value of non-homestead real property at or below an annually indexed threshold, limiting increases to 20 percent per year. It was created by SB 2 (2023) as a pilot covering tax years 2024, 2025 and 2026, and it expires December 31, 2026 unless the Legislature renews it (Travis CAD, summary of the 2023 Texas property tax law changes).

It excludes land receiving agricultural special appraisal and homesteads already covered by the 10 percent cap.

The threshold is indexed annually and published sources disagree on the current figure, so confirm it with the appraisal district for any property anywhere near it. For most residential rentals in Kendall County the threshold is not the operative question anyway; the expiration date is.

That sunset is the single most actionable fact on this page for an investor. A multi-year pro forma written in 2026 that assumes 20 percent as a permanent ceiling on appraised value is assuming a statute with a scheduled end date. Model the hold both with and without it, and watch the 2027 legislative session.

What does not change: the protest right

An investor has the same right to protest as a homeowner, and on a property with no exemptions and no meaningful cap, the protest is doing more work.

• Deadline: May 15, or 30 days after the appraisal district mails the notice of appraised value, whichever is later. The clock runs from the mailing date, not from when the notice arrives. A deadline falling on a weekend or holiday rolls to the next business day.
• The notice of appraised value must be sent by May 1, or by April 1 for a residence homestead, "or as soon as practical thereafter" under Tax Code Section 25.19. A rental is on the later schedule.
• The notice of protest is Comptroller Form 50-132, and a protest is sufficient if it identifies the property, the owner, and a subject showing dissatisfaction, in writing.
• The appraisal review board must give at least 15 days notice of the hearing, and an owner may appear in person, by phone or videoconference, or by written affidavit.

Source: Texas Comptroller, Property Tax Protests.

For a Boerne or Kendall County rental, the protest goes to Kendall Appraisal District (kendallad.org). Boerne is in Kendall County — not Bexar County and not the City of San Antonio, so Bexar CAD deadlines, notices and portals are the wrong ones.

The income-tax side belongs to a CPA

Property tax is only half of what changes. A rental also becomes an income-producing asset on the owner's federal return, and that brings in a set of questions this page will not answer because they are decided filer by filer:

• Depreciation — the recovery period, the method, and what portion of basis is depreciable versus allocated to land.
• Depreciation recapture on sale.
• Passive activity loss rules and whether losses are currently deductible, suspended, or usable against other income.
• Which expenses are deductible, and the line between a repair and a capital improvement.
• The interaction with a 1031 exchange and the basis that carries forward.
• Hotel occupancy tax if the property is operated as a short-term rental — 13 percent combined in Boerne, 6 percent state and 7 percent city.

Every one of those is a CPA or tax advisor's work. Texas has no state individual income tax, which changes the arithmetic but not the questions.

The conversion moment, which people get wrong

Two timing traps are worth naming.

January 1 governs. Homestead qualification depends on owning and occupying the property as a principal residence on January 1 of the tax year. A property converted to a rental mid-year does not lose its homestead treatment retroactively for that year — but the following January 1 is a hard line.

Keeping an exemption you are no longer entitled to is not a savings strategy. An exemption that stays on a property after it stops being the owner's residence is an exposure, and appraisal districts do check. Kendall Appraisal District is the right place to sort out what applies to a specific property and what has to be removed.

The short version

	Homestead	Rental
School district exemption	$140,000	none
Over-65 additional school exemption	$60,000	none
Local option exemption up to 20 percent	available	none
Annual appraisal cap	10 percent	20 percent circuit breaker, through tax year 2026
Over-65 school tax ceiling	yes	no
Protest right	yes	yes

Related questions

• What is the Texas homestead exemption?
• What is the 10 percent homestead cap in Texas?
• What is a 1031 exchange?
• What is the BRRRR method, and does it work in Texas?
• What are property taxes like in Boerne?

Questions about a specific property?

Call or text 830-446-3847 · Email heath.shepard@kw.com

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This page explains how Texas property tax treatment differs for rentals as of September 2026 and is not tax advice. Kendall Appraisal District decides exemptions and valuations for Boerne-area property, and a CPA or tax advisor handles depreciation, deductions and anything on your federal return.