The Texas post-judgment interest rate is the U.S. prime rate on the date the judgment is signed, with a statutory floor of 5% and a ceiling of 15%. For judgments rendered in early 2026, that rate is 6.75%.1Office of Consumer Credit Commissioner. Texas Credit Letter 2026 It compounds annually, starts the day the judgment is rendered, and keeps running until the judgment is paid in full. If the underlying dispute involves a contract that sets its own interest rate, that contract rate governs instead, capped at 18%.
How the Rate Is Set
The Texas Office of Consumer Credit Commissioner publishes the post-judgment rate on the 15th of each month for judgments rendered the following month. The rate equals the prime rate published by the Federal Reserve Board of Governors on the date of computation, subject to a 5% minimum and 15% maximum.2State of Texas. Texas Finance Code – Section 304.003 Judgment Interest Rate If prime falls below 5%, the rate stays at 5%. If prime climbs past 15%, it stops at 15%.
The rate locks in on the date the judgment is rendered. It does not float with prime after that. A judgment signed in March 2026 at 6.75% keeps earning 6.75% for its entire life, whether prime later rises to 8% or drops to 4%. That single fixed number determines every dollar of interest the debtor will owe going forward.
When Interest Starts and Stops
Post-judgment interest begins accruing on the date the court renders the judgment and continues until the judgment is fully satisfied.3State of Texas. Texas Finance Code – Section 304.005 Accrual of Judgment Interest There is no grace period. If a judge signs a $100,000 judgment on April 1, interest runs starting April 1. Plans to appeal, ongoing settlement talks, and delays in serving the debtor make no difference.
The clock stops only when the debtor pays the full balance, including all accrued interest and court costs. Partial payments reduce the principal, and future interest accrues on the smaller remaining balance, but interest keeps running on whatever is still unpaid.
Annual Compounding
Texas post-judgment interest compounds annually.4State of Texas. Texas Finance Code – Section 304.006 Compounding of Judgment Interest At the end of each year, unpaid interest is added to the principal, and the next year’s interest is calculated on that larger balance.
On a $200,000 judgment at 6.75%, first-year interest is $13,500. If the debtor pays nothing, second-year interest is calculated on $213,500, not on the original $200,000. Over five or ten years, compounding can add tens of thousands of dollars to what the debtor owes. That is the mechanical answer to why old judgments can balloon well past their original size.
When a Contract Rate Applies Instead
The prime-rate formula only governs when the underlying dispute has no contract with its own interest term. If the judgment arises from a contract that specifies an interest rate, the post-judgment rate matches the contract rate, up to a statutory maximum of 18% per year.5State of Texas. Texas Finance Code – Section 304.002 Judgment Interest Rate The contract rate can be fixed or variable.
A commercial loan contract calling for 12% produces a 12% post-judgment rate. A contract calling for 22% is cut back to the 18% cap. Where no contract rate governs, the statutory prime-based formula applies. This distinction matters most in commercial loan disputes and credit-agreement litigation, where the contract rate is often higher than prime.
Prejudgment Interest Is Different
People often confuse post-judgment interest with prejudgment interest, but the two cover different periods and follow different rules. Prejudgment interest compensates the plaintiff for the time before judgment is entered. It begins accruing on the earlier of two dates: 180 days after the defendant receives written notice of the claim, or the date the lawsuit is filed. It runs until the day before the judgment is rendered.6State of Texas. Texas Finance Code – Section 304.104 Accrual of Prejudgment Interest
By statute, prejudgment interest is simple interest and does not compound. Once the judgment is signed, prejudgment interest stops and post-judgment interest takes over, and only then does compounding kick in. Prejudgment interest cannot be recovered on exemplary (punitive) damages.7State of Texas. Texas Civil Practice and Remedies Code – Section 41.007 Prejudgment Interest A case that takes three years to reach judgment accumulates simple prejudgment interest across those three years, and then the full judgment amount, including that interest, begins earning compounding post-judgment interest.
Interest During an Appeal
Filing an appeal does not pause post-judgment interest. The statute runs interest from the date of rendition until satisfaction, with no exception for appeals.3State of Texas. Texas Finance Code – Section 304.005 Accrual of Judgment Interest A debtor who appeals and loses two years later owes the original judgment plus two full years of compounded interest.
A supersedeas bond under Texas Rule of Appellate Procedure 24 can suspend enforcement during the appeal, but it does not stop interest from accruing. The required bond amount actually has to include estimated interest for the appeal’s duration, along with compensatory damages and court costs. For debtors with limited resources, the required security is capped at the lesser of 50% of the debtor’s net worth or $25 million. If the appellate court affirms, the debtor pays the full judgment with all accumulated interest.
Tax Treatment of Interest You Collect
The IRS treats interest earned on a judgment as ordinary taxable income, even when the underlying damages are not taxable. Compensatory damages for personal physical injury are generally tax-free, but interest that accrues on those damages is not.8Internal Revenue Service. Publication 525 – Taxable and Nontaxable Income A plaintiff who wins a $500,000 personal injury verdict and collects $40,000 in post-judgment interest reports that $40,000 as income.
This surprises creditors who wait years for payment and end up with a substantial interest component. If you expect a large interest payment, plan for the tax hit before the check arrives. On the debtor side, interest paid on a personal judgment is generally not deductible; interest paid on a business-related judgment may be deductible as a business expense, which is worth confirming with a tax professional who knows the specifics of the case.