Texas: Prejudgment Interest Rules

The short answer

Texas is a genuine two-track state. If you're suing over a wrongful death, a
personal injury, or property damage, an actual statute — Finance Code
Chapter 304, Subchapter B — guarantees you prejudgment interest as a matter
of right, at a rate tied to the state's postjudgment interest rate, starting
well before you filed suit. If you're suing over a breach of contract
instead, that statute doesn't apply to you at all (it says so in its own
first section); Texas courts instead give you prejudgment interest through
judge-made common law, but — in one of the more practical quirks in Texas
law — that common-law rule ends up looking almost identical to the statute
in rate and timing, just without ever being written down as a statute
itself.

Requirements one by one

Governing law

Finance Code Chapter 304 governs "Judgment Interest" generally. Its
Subchapter B (§§ 304.101-304.107) is the ONLY part of Texas law that
directly creates a right to prejudgment interest, and by its own terms it
"applies only to a wrongful death, personal injury, or property damage
case" (§ 304.101). For a breach-of-contract claim, there's no comparable
prejudgment-interest statute — the right instead comes from the Texas
Supreme Court's common-law decision in Johnson & Higgins of Texas, Inc. v.
Kenneco Energy, Inc., 962 S.W.2d 507 (Tex. 1998), which borrows Chapter
304's own rate mechanism for a contract claim rather than creating a
separate one.

Interest rate

Both tracks end up at the same number. Under § 304.103, "the prejudgment
interest rate is equal to the postjudgment interest rate applicable at the
time of judgment." That postjudgment rate itself has two paths: if the
judgment is on a contract that itself provides for interest, the rate is
the lesser of the contract's own rate or 18% a year (§ 304.002); if not,
the rate floats with the Federal Reserve's prime rate, published monthly by
the state's consumer credit commissioner, with a floor of 5% a year and a
ceiling of 15% a year (§ 304.003). Johnson & Higgins held that a breach-
of-contract claim's prejudgment interest should be "calculated as simple
interest at the judgment rate provided in" this same statute, so a contract
plaintiff ends up subject to the identical rate rule as a personal-injury
plaintiff, just by a different legal route.

When interest starts running

For a wrongful death, personal injury, or property damage claim, § 304.104
starts the clock "on the earlier of the 180th day after the date the
defendant receives written notice of a claim or the date the suit is
filed," running through "the day preceding the date judgment is rendered."
For a breach-of-contract claim, Johnson & Higgins set a similar but
distinct trigger: prejudgment interest "begins to accrue six months after
the date of the breach" — measured from the breach itself, not from when
the defendant got notice or was sued.

Contract vs. tort claims

The two tracks are built to feel almost the same in practice — same rate
mechanism, simple interest only, and a deferred start date of roughly six
months — but they come from entirely different sources of law. Subchapter B
is an actual statute, and it applies ONLY to wrongful death, personal
injury, and property damage. A breach-of-contract claim gets prejudgment
interest only because the Texas Supreme Court chose, as a matter of
judge-made common law, to import the statute's rate mechanism by analogy.
That distinction matters at the margins — a claim that's neither a
covered tort nor a contract claim (for example, some equitable claims) may
not fit cleanly into either track, and courts resolve that gap case by
case under "general principles of equity."

Mandatory or discretionary

Both tracks are mandatory. Section 304.102 says plainly that "a judgment in
a wrongful death, personal injury, or property damage case earns
prejudgment interest" — not that a court may award it. Texas courts
describe prejudgment interest generally, including on the common-law
contract side, as available to a prevailing party "as a matter of course,"
not something left to a jury's or judge's discretion the way some other
states treat it.

Simple or compound

Both tracks are simple interest, with no compounding, and this was a
deliberate legislative and judicial choice. Section 304.104 says
prejudgment interest "is computed as simple interest and does not
compound." On the contract side, this was actually a change: the older
common-law rule from Cavnar v. Quality Control Parking, Inc., 696 S.W.2d
549 (Tex. 1985) had allowed prejudgment interest to compound daily, but
Johnson & Higgins discarded that approach and matched the statute's
simple-interest rule instead.

Claims against the government

Texas has a separate, dedicated prejudgment-interest rule for a contract
claim against a state agency that goes through the Government Code Chapter
2260 dispute-resolution process (the required pre-suit negotiation and
administrative-hearing track for state contract disputes). Section 2260.106
says that "Chapter 304, Finance Code, applies to a judgment awarded to a
claimant under this chapter, except that the applicable rate of interest
may not exceed six percent" — the same rate mechanism as everyone else, but
with a hard 6%-a-year ceiling that doesn't apply to a private defendant.

Other exceptions

Section 304.1045 flatly bars prejudgment interest "on an award of future
damages" — only past losses earn it. Sections 304.105-304.107 give a
defendant a real incentive to make an early written settlement offer: if
the eventual judgment doesn't beat the offer, prejudgment interest simply
stops accruing on the judgment (or on the offer amount, if the judgment
does exceed it) for as long as the offer remained open to accept.

What trips people up

The single biggest trap is assuming Chapter 304's prejudgment-interest
statute covers a contract dispute. It doesn't — read § 304.101 literally
and it only reaches "a wrongful death, personal injury, or property damage
case." A contract plaintiff who cites Subchapter B directly is citing the
wrong authority; the actual basis is the common-law rule from Johnson &
Higgins, which happens to borrow the same numbers.

The rate itself is a moving target, not a fixed number like several other
states use. Because it floats with the Federal Reserve's prime rate every
month (subject to the 5%/15% floor and ceiling), the "current" rate on the
day suit is filed may not be the rate that actually applies — § 304.103
locks in whatever the postjudgment rate is "at the time of judgment," which
could be years later and a different rate entirely.

The 180-day deferral is easy to miss on both tracks. Prejudgment interest
doesn't start on the date of injury or breach itself (except that the
contract common-law rule literally counts six months FROM the breach) — for
the statutory tort track, it's measured from written notice of the claim or
the filing of suit, whichever comes first, meaning a plaintiff who delays
sending a demand letter can accidentally delay when interest starts
running in their own favor.

Common questions

Does a Texas breach-of-contract judgment get prejudgment interest?
Yes, but not under the Chapter 304 prejudgment-interest statute itself,
which only covers wrongful death, personal injury, and property damage.
A contract claim gets prejudgment interest under a separate common-law
rule that uses the same rate.

What rate applies if my contract doesn't say anything about interest?
A floating rate tied to the Federal Reserve's prime rate, with a floor of
5% a year and a ceiling of 15% a year, published monthly by the Texas
Office of Consumer Credit Commissioner.

Can I get prejudgment interest on damages I haven't incurred yet?
No. Section 304.1045 bars prejudgment interest on an award of future
damages entirely.

Does prejudgment interest compound in Texas?
No. It's simple interest on both the statutory (tort) track and the
common-law (contract) track.

Statutes and sources

• Tex. Fin. Code § 304.101 — "This subchapter applies only to a wrongful
  death, personal injury, or property damage case of a court of this
  state." Accessed 2026-07-05:
  https://codes.findlaw.com/tx/finance-code/fin-sect-304-101/
• Tex. Fin. Code § 304.102 — "A judgment in a wrongful death, personal
  injury, or property damage case earns prejudgment interest." Accessed
  2026-07-05: https://codes.findlaw.com/tx/finance-code/fin-sect-304-102/
• Tex. Fin. Code § 304.103 — "The prejudgment interest rate is equal to
  the postjudgment interest rate applicable at the time of judgment."
  Accessed 2026-07-05:
  https://codes.findlaw.com/tx/finance-code/fin-sect-304-103/
• Tex. Fin. Code § 304.104 — "Except as provided by Section 304.105 or
  304.108, prejudgment interest accrues on the amount of a judgment during
  the period beginning on the earlier of the 180th day after the date the
  defendant receives written notice of a claim or the date the suit is
  filed and ending on the day preceding the date judgment is rendered.
  Prejudgment interest is computed as simple interest and does not
  compound." Accessed 2026-07-05:
  https://codes.findlaw.com/tx/finance-code/fin-sect-304-104/
• Tex. Fin. Code § 304.1045 — "Prejudgment interest may not be assessed or
  recovered on an award of future damages." Accessed 2026-07-05:
  https://codes.findlaw.com/tx/finance-code/fin-sect-304-1045/
• Tex. Fin. Code § 304.105 — "(a) If judgment for a claimant is equal to
  or less than the amount of a settlement offer of the defendant,
  prejudgment interest does not accrue on the amount of the judgment
  during the period that the offer may be accepted. (b) If judgment for a
  claimant is more than the amount of a settlement offer of the defendant,
  prejudgment interest does not accrue on the amount of the settlement
  offer during the period that the offer may be accepted." Accessed
  2026-07-05: https://codes.findlaw.com/tx/finance-code/fin-sect-304-105/
• Tex. Fin. Code § 304.002 — "A money judgment of a court of this state on
  a contract that provides for interest or time price differential earns
  postjudgment interest at a rate equal to the lesser of: (1) the rate
  specified in the contract, which may be a variable rate; or (2) 18
  percent a year." Accessed 2026-07-05:
  https://codes.findlaw.com/tx/finance-code/fin-sect-304-002/
• Tex. Fin. Code § 304.003 — "(a) A money judgment of a court of this
  state to which Section 304.002 does not apply, including court costs
  awarded in the judgment and prejudgment interest, if any, earns
  postjudgment interest at the rate determined under this section. (b) On
  the 15th day of each month, the consumer credit commissioner shall
  determine the postjudgment interest rate to be applied to a money
  judgment rendered during the succeeding calendar month. (c) The
  postjudgment interest rate is: (1) the prime rate as published by the
  Board of Governors of the Federal Reserve System on the date of
  computation; (2) five percent a year if the prime rate ... is less than
  five percent; or (3) 15 percent a year if the prime rate ... is more
  than 15 percent." Accessed 2026-07-05:
  https://codes.findlaw.com/tx/finance-code/fin-sect-304-003/
• Tex. Gov't Code § 2260.106 — "Chapter 304, Finance Code, applies to a
  judgment awarded to a claimant under this chapter, except that the
  applicable rate of interest may not exceed six percent." Accessed
  2026-07-05:
  https://law.justia.com/codes/texas/government-code/title-10/subtitle-f/chapter-2260/subchapter-c/section-2260-106/
• Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d
  507, 532 (Tex. 1998) — holds that "prejudgment interest should be
  calculated as simple interest at the judgment rate provided in
  Tex.Rev.Civ.Stat. art. 5069-1.05, § 6 [now Finance Code ch. 304], and
  that prejudgment interest on a breach of contract claim begins to accrue
  six months after the date of the breach." Citation verified via
  legalresearch.