Jefferson County property tax bills go out in October, and for most Birmingham homeowners the number will be smaller than the market would suggest. That is the 7% cap doing its job. What almost nobody realizes is how easy it is to turn the cap off, and that some of the most common moves a homeowner makes are exactly the ones that do it.
The cap comes from HB73, enacted as Act 2024-344. According to the Alabama Department of Revenue, it limits the annual increase in the taxable assessed value of Class II and Class III real property to 7 percent. The base year was October 1, 2024, for tax collections beginning October 1, 2025. Class III is where owner-occupied homes sit, assessed at 10 percent of fair market value.
The Jefferson County Board of Equalization puts it plainly on its own site: if you are approved for the 7% cap and not subject to exclusion, it is applied to your assessed value and reflected on your tax bill in October.
“Not subject to exclusion” is carrying a lot of weight in that sentence.
The five triggers that cancel the cap
The Department of Revenue lists the events that remove the cap and send the property back to its full, true assessed value:
- The property changes ownership. Buy a house in Crestwood and the taxable assessed value resets to true assessed value for the following tax year.
- The classification changes. Residential Class III to commercial Class II, for example.
- The property has never been assessed. New construction, or a newly added improvement never previously on the rolls.
- An addition or a significant improvement is made. Not ordinary maintenance. Something structural.
- The property lands in a tax increment district under Chapter 99 of Title 11.
Tax adviser Ryan LLC flagged the same exception list back when the bill was moving through the legislature in April 2024.
The Department is blunt about what this means for buyers. Asked whether a purchaser can rely on the current owner’s tax bill as a guide, ADOR’s answer is one word: “No.” Changes in ownership trigger a reassessment.
Where Birmingham owners get surprised
Read the Department’s published FAQs and a few scenarios jump out as things people around here actually do.
You moved and kept the old house as a rental. ADOR’s example is nearly verbatim: “I bought a new residence and will now be renting out my previous residence.” The answer is that the parcel changes from Class III to Class II, so the entire parcel is excluded from the cap. Your assessment rate doubles from 10 percent to 20 percent, and the cap that was smoothing your increases disappears in the same year. That is a double hit, and it lands on accidental landlords hardest.
You rebuilt after storm damage. This one cuts both ways. Repairs that remediate damage and return the structure to its previous state keep the cap. But if the structure was entirely replaced, or the work restored it beyond its previous state, the property is excluded. In a metro that takes the weather Birmingham takes, the line between “put it back” and “made it better” is worth understanding before the contractor starts.
You finished the garage, added the pool, built the shed. ADOR’s answer is unambiguous: any new improvement, “regardless of size or scope,” excludes the entire parcel from the cap. Not the improvement. The parcel.
You inherited the house. Here the news is good. Transfers between spouses or family members for no or nominal consideration, or because of the original owner’s death, do not count as a change in ownership. The cap survives. ADOR’s family-member definition covers children, siblings, parents, grandparents, grandchildren, stepfamily, and adoptive relationships. If you inherited a house in East Lake and have been holding it, the cap has been protecting you.
You redeemed after a foreclosure or a tax sale. Also protected. ADOR excludes redemption after foreclosure of a mortgage, tax sale, or tax lien from the ownership-change trigger.
The cap gap, and why your bill can rise in a falling market
There is a wrinkle that is going to confuse people this fall.
Because the cap held taxable values down while market values ran, a gap opened between the true assessed value and the capped taxable value. ADOR calls this the “cap gap.” During a downturn, the taxable assessed value keeps climbing at up to 7 percent a year until it catches the true assessed value. In the Department’s own words, “just as taxable ‘capped’ assessed values lag in times of hyperinflation, the capped values will also lag in times of market downturns.”
Translation: Birmingham home values can soften and your tax bill can still go up. The Department even addresses the version of this that stings most, where a homeowner wins at the Board of Equalization, gets the market value lowered, and the tax bill rises anyway. That is the gap closing, not a mistake.
Worth knowing: the cap only touches assessed value. The Board of Equalization still hears fair market value disputes, and circuit court appeals still work the same way.
One more date. Per ADOR, the cap’s limitations continue through the fiscal year beginning October 1, 2027. It is not permanent.
The practical read
Alabama property taxes are low by national standards, and the cap makes holding a house here cheaper than it would otherwise be. But the cap rewards one specific behavior: staying put, in a house you occupy, that you do not substantially alter.
That is not everyone’s situation. If you have a house you did not choose, in a condition you did not create, the cap is not much comfort:
- The inherited house in Ensley that keeps the cap but also keeps needing a roof.
- The old house you rented out, where you just found out you lost the cap and moved to a 20 percent assessment rate in the same year.
- The fire-damaged house where rebuilding right cancels the cap and rebuilding cheap does not fix the problem.
In each case the tax question is downstream of a bigger one, which is whether you want to keep the house at all. Property taxes are due October 1 and delinquent after December 31, so the fall is when this stops being abstract.
If the answer is that you would rather be out of it, Birmingham Homebuyers buys houses in any condition, as-is, for cash. No repairs, no cleanout, no commission, no waiting on a buyer’s financing. You can get a cash offer today at no cost and no obligation.
Related reading: how to sell your house in Alabama, selling an inherited house fast in Birmingham, and selling a rental property in Birmingham. We also buy across Jefferson and Shelby counties, including Bessemer, Hoover, Trussville, and Gardendale.
This article summarizes published guidance from the Alabama Department of Revenue and the Jefferson County Board of Equalization. It is general information, not tax or legal advice. Confirm your own parcel’s status with the Jefferson County Board of Equalization at 205-325-5566.
Sources
- Alabama Department of Revenue, “7% Cap Information – HB73 (Act 2024-344)” (cap mechanics, exclusion list, FAQs, cap gap, definitions, sunset, Class III at 10%) — https://www.revenue.alabama.gov/property-tax/7-cap-information-hb73-act-2024-344/
- Jefferson County Board of Equalization homepage (7% cap applied to assessed value and reflected on the October tax bill; Birmingham office phone) — https://boe.jccal.org/
- Brad Wallace, “Alabama Caps Annual Property Tax Assessment Increases at 7%,” Ryan LLC, April 23, 2024 (independent confirmation of the exception list; sponsors Rep. Phillip Pettus and Sen. David Sessions) — https://ryan.com/about-ryan/news-and-insights/2024/alabama-caps-annual-property-tax-assessment/
- Jefferson County 2026 protest window, May 26 – June 24, 2026, per Jefferson County’s 2026 Property Notices page — https://www.jccal.org/208/2026-Property-Notices