Moving to Texas: Why the Property Tax Hurts More Than You Think (2026)

Texas loves to brag about having no state income tax.

What they don't mention until you're signing closing papers is that you'll pay $12,000/year in property taxes on a $500,000 house.

Every. Single. Year.

I almost bought a house in Austin last year. The listing said "$575,000." I got pre-approved, made an offer, and started daydreaming about my new Texas life with no income tax.

Then I saw the property tax bill: $13,225 per year. That's $1,102 per month just in property taxes.

For context, my friend in California pays $6,250/year on a $625,000 house.

I pulled my offer and spent the next two weeks running the math on whether Texas's "no income tax" is actually a good deal or an expensive trap.

Let me show you the numbers nobody talks about.

Texas Property Tax: The Numbers That Shock People

Texas has the 7th highest property tax rate in the nation at an effective rate of 1.60-1.80% depending on county.

Compare that to the national average of 0.99%.

What You Actually Pay

$300,000 house in Texas:

• Property tax at 1.70%: $5,100/year
• Monthly: $425

$500,000 house in Texas:

• Property tax at 1.70%: $8,500/year
• Monthly: $708

$750,000 house in Texas (Austin):

• Property tax at 1.90%: $14,250/year
• Monthly: $1,187

The County Breakdown

Rates vary significantly by county:

Highest:

• Fort Bend County: 2.10%
• Denton County: 2.05%
• Williamson County (north of Austin): 1.97%

Moderate:

• Harris County (Houston): 1.73%
• Dallas County: 1.74%
• Travis County (Austin): 1.67%

Lower (but still high):

• Bexar County (San Antonio): 1.52%
• El Paso County: 1.38%

Even the "low" counties charge more than most states.

Why Texas Property Taxes Are So High

Texas has no state income tax, so they fund everything through:

• Property taxes
• Sales taxes
• Fees and penalties

Schools, roads, police, fire departments—all funded by property taxes.

The result: Homeowners carry the entire tax burden.

The "No Income Tax" Trade-Off: Who Wins and Who Loses

Let's run the actual math comparing Texas to states with income tax.

Scenario #1: $75,000 Salary, $350,000 House

Texas:

• State income tax: $0
• Property tax (1.70%): $5,950/year
• Total: $5,950

Colorado (for comparison):

• State income tax (4.4%): $3,300/year
• Property tax (0.49%): $1,715/year
• Total: $5,015

Winner: Colorado by $935/year

Wait, what? Texas costs MORE for middle-income earners with modest homes?

Yes.

Scenario #2: $150,000 Salary, $500,000 House

Texas:

• Income tax: $0
• Property tax: $8,500/year
• Total: $8,500

North Carolina:

• Income tax (4.75%): $7,125/year
• Property tax (0.77%): $3,850/year
• Total: $10,975

Winner: Texas by $2,475/year

Now Texas starts to win. At higher incomes, the no-income-tax benefit outweighs property tax costs.

Scenario #3: $250,000 Salary, $700,000 House

Texas:

• Income tax: $0
• Property tax (1.80%): $12,600/year
• Total: $12,600

California:

• Income tax (9.3%): $23,250/year
• Property tax (0.76% under Prop 13): $5,320/year
• Total: $28,570

Winner: Texas by $15,970/year

At high incomes, Texas absolutely destroys California on taxes.

The Break-Even Point

For most income-tax states, Texas becomes cheaper when:

• Your income exceeds $120,000-$150,000
• Your home value is under $600,000
• You plan to stay long-term (property tax increases are capped at 10%/year with homestead)

Below $100,000 income? Texas often costs MORE than income-tax states once you factor in property and sales taxes.

The Homestead Exemption: Texas's Partial Redemption

Texas offers a homestead exemption that caps annual property tax increases at 10% on your primary residence.

How It Works

Year 1 (2024):

• Home assessed value: $450,000
• Property tax at 1.70%: $7,650

Year 2 (2025):

• Market value jumps to $520,000 (Texas real estate boom)
• WITHOUT homestead: Tax would be $8,840 (16% increase)
• WITH homestead: Tax capped at $8,415 (10% increase max)
• Savings: $425

This protects you from explosive tax increases as home values surge.

The Homestead Limitations

You must:

• Use it as your primary residence
• File homestead exemption with county (doesn't happen automatically)
• Live there as of January 1 to get that year's benefit

What it doesn't do:

• Reduce the base tax rate (you still pay 1.70%+)
• Apply to investment properties or second homes
• Prevent eventual massive increases (10%/year compounds over time)

Example: Over 10 years at 10% annual increases:

• Start: $7,650/year
• Year 10: $19,843/year

Even with the cap, you're paying 2.6X more after a decade.

Texas vs California: The Property Tax Myth

People love to bash California taxes, but let's run the real comparison.

$600,000 House, $150,000 Salary

Texas:

• Income tax: $0
• Property tax (1.75%): $10,500/year
• Sales tax (8.25%): ~$3,300 on $40k spending
• Total annual taxes: $13,800

California:

• Income tax: $11,775/year
• Property tax (0.76% thanks to Prop 13): $4,560/year
• Sales tax (7.25%): ~$2,900
• Total annual taxes: $19,235

Texas wins by $5,435/year.

But here's where it gets interesting...

The 30-Year Comparison

California's Prop 13 locks your property tax assessment at purchase price, with only 2% annual increases.

Texas allows 10% annual increases.

Year 1:

• Texas: $10,500
• California: $4,560

Year 10:

• Texas: $24,372 (assuming max increases)
• California: $5,538

Year 20:

• Texas: $63,280/year
• California: $6,724/year

Over 30 years, Californians with Prop 13 protection pay way less in property taxes, even though the rate is similar.

The catch: This only works if you buy and hold. Californians who move pay taxes on new (higher) assessed value.

The Hidden Property Tax Costs

MUD Districts (Municipal Utility Districts)

Many Texas suburbs have MUD taxes on top of regular property taxes.

What is MUD? Special districts that provide water, sewage, and drainage. They issue bonds to build infrastructure, and homeowners pay them back through additional property taxes.

Cost: 0.50-1.50% extra on top of base property tax.

A $500,000 house in a MUD district:

• Base property tax: $8,500
• MUD tax (1.00%): $5,000
• Total: $13,500/year

Realtor might not mention the MUD tax until you're in contract.

HOA Fees Aren't Property Tax, But...

Texas suburbs love HOAs:

• $100-$400/month is common
• $1,200-$4,800/year

Combine with property taxes:

• Property tax: $10,000
• HOA: $3,000
• Total annual housing cost (beyond mortgage): $13,000

Appraisal Increases You Must Fight

Texas counties reassess property values annually. They're aggressive about raising assessments.

Typical scenario:

• You buy house for $450,000
• Year 2: County assesses it at $490,000
• Without homestead: You now pay tax on $490,000
• With homestead: Capped at 10% increase, but you'll still pay more

You can protest (and should). Many people hire companies to protest for them (they take 25-50% of savings).

When the Math Works in Texas's Favor

High Earners with Modest Homes

$300,000 salary, $500,000 house:

Texas savings:

• Avoid ~$20,000+/year in state income tax (vs CA/NY/NJ)
• Pay $8,500 in property tax
• Net benefit: $11,500/year

This is the sweet spot. High income, reasonable house.

Remote Workers with Coastal Salaries

If you earn $200,000 working remotely for a California company but live in Texas:

You get:

• No California income tax (you're a TX resident)
• No Texas income tax
• Lower housing costs than California
• Pay only Texas property tax

Total tax savings: $15,000-$20,000/year

This is why Austin exploded with remote workers 2020-2023.

Business Owners and Investors

No state income tax means:

• Business profits aren't taxed at state level
• Capital gains aren't taxed at state level
• Dividend income isn't taxed

If you have $500,000 in investment income, you save $40,000+/year vs California.

Property taxes are painful but worth it.

When Texas Doesn't Make Financial Sense

Middle-Income Buyers of Expensive Homes

$90,000 salary, $550,000 house (common in Austin):

• Property tax: $9,350/year
• Sales tax: $3,000/year
• Total: $12,350

Vs comparable income-tax state:

• Income tax: $4,500
• Property tax: $4,000
• Sales tax: $2,500
• Total: $11,000

You're paying $1,350/year MORE in Texas despite "no income tax."

People Who Buy and Sell Frequently

Homestead exemption only helps if you stay put. If you move every 3-5 years:

• You reset to new (higher) assessed value each time
• You lose the compounding benefit of the 10% cap
• You pay full freight on inflated home prices

Retirees on Fixed Income

If you have low retirement income ($50,000/year) but own a $400,000 house:

• Income tax savings: $2,000-$3,000/year (minimal)
• Property tax cost: $6,800/year

You'd be better off in a state with income tax and low property tax.

Exception: Texas offers additional exemptions for seniors 65+, which helps significantly.

The Sales Tax Multiplier Effect

Texas also has high sales tax: 6.25% state + up to 2% local = 8.25% average.

On $50,000 of annual taxable purchases:

• Texas sales tax: $4,125/year
• Oregon (no sales tax): $0
• Difference: $4,125/year

Combine this with property taxes and suddenly Texas's "no income tax" is less appealing.

The Real Cost of Living Comparison

Let's compare total tax burden for a typical family:

$125,000 household income, $475,000 house, $45,000 annual spending

Texas

• Income tax: $0
• Property tax: $8,075
• Sales tax: $3,712
• Total: $11,787

Tennessee (also no income tax)

• Income tax: $0 (on wages)
• Property tax: $3,325 (0.70% rate)
• Sales tax: $4,275 (9.5% rate, highest in nation)
• Total: $7,600

Tennessee is $4,187/year cheaper despite also having no income tax.

North Carolina (has income tax)

• Income tax: $5,937
• Property tax: $3,657
• Sales tax: $3,150
• Total: $12,744

Texas wins by $957/year but barely.

Conclusion from Comparison

Texas is cheaper than high-tax states (CA, NY, NJ) but more expensive than many other no-income-tax or low-income-tax states.

FAQ: Texas Property Tax

Q: Is Texas property tax really that high?
Yes. 1.60-2.10% vs national average of 0.99%. You'll pay 60-110% more than most states.

Q: Does no income tax make up for it? Depends on your income. Above $120k, yes. Below $100k, often no.

Q: Can I avoid high property taxes in Texas? Not really. Even cheaper areas have rates of 1.30-1.50%. It's statewide.

Q: What's the homestead exemption save me? It caps annual increases at 10%, which helps over time. Also exempts $100,000 of assessed value for school taxes in some districts.

Q: Do seniors get a break? Yes. Age 65+ get additional exemptions and freezes. Significantly reduces burden for retirees.

Q: Should I move to Texas for tax reasons? If you earn $150k+, probably yes. If you earn under $100k, run the full math first—you might not save money.

Q: Will property taxes keep going up? Yes. Texas home values are rising fast, and tax rates aren't dropping. Budget for increases.

Q: Are there any Texas cities with low property tax? No. Even the lowest counties (El Paso at 1.38%) are higher than most other states.

Bottom Line: Run Your Personal Numbers

Texas's "no income tax" is a huge benefit for:

• High earners ($150k+)
• Business owners
• Investors
• Remote workers with out-of-state salaries

It's NOT a benefit for:

• Middle-income earners ($60k-$100k)
• People buying expensive homes relative to income
• Anyone who moves frequently

The property tax rate of 1.70-2.00% is real, and it costs real money.

Before you move to Texas "for the tax savings," calculate:

1. Income tax you'd pay in your current state
2. Property tax you'd pay on a Texas home in your price range
3. Sales tax differences
4. Total cost comparison

You might find Texas saves you $10,000/year. Or you might find it costs you $2,000/year more.

The answer depends entirely on your income, home price, and current state.

Don't believe the hype. Do the math.

---

Meta Description: Texas charges no income tax but 2% property tax. We break down who wins and who loses with real examples.