Texas vs. California Taxes: A Full Comparison

• Texas does not have an individual state income tax, while California uses a graduated income tax with rates that increase with income. 
• California generally limits property taxes to 1% of assessed value, while Texas property taxes are set and collected by local taxing units. 
• Neither state has a lower overall tax burden for every household, since the impact depends on income and the combination of taxes paid. 
• Property taxes are an ongoing homeownership expense and can vary based on the home’s value, location, local tax rates and applicable exemptions. 
• Californians considering a move to Texas should compare the full financial picture rather than focusing on a single tax difference.

Texas vs. California Taxes: A Full Comparison

For Californians considering a move to Texas, taxes are often part of the conversation. But a California vs. Texas taxes comparison isn’t as simple as saying one state is always cheaper. Texas and California raise revenue differently, which means your income, spending and homeownership costs can all affect what you ultimately pay.

Here’s what prospective Texas homebuyers should know.

Texas Has No State Individual Income Tax

One of the biggest differences in taxes in Texas vs. California is individual income tax. Texas does not charge a state income tax. California uses a graduated income tax. Its rate rises as income increases.

For Californians considering a move, that can change how much of their income stays in their paycheck. 

Property Taxes Work Differently in Texas and California

The property tax in Texas vs. California works differently. California limits the general property tax rate to 1% of assessed value, although additional voter-approved assessments can apply. Proposition 13 also generally limits annual increases in assessed value until a property changes ownership or undergoes new construction.

Texas has no statewide property tax. Instead, local taxing units, including cities, counties and school districts, set tax rates and collect property taxes. For buyers comparing property tax Texas vs. California, the amount owed will depend on the home’s taxable value, local tax rates and any applicable exemptions.

That makes researching the taxes associated with a specific home an important part of comparing homeownership costs.

Comparing the Overall Tax Burden

Neither Texas nor California is automatically the lower-tax state for every household. The difference depends largely on income and how much a household is affected by income, property and sales taxes.

Texas’ lack of an individual state income tax can benefit some households, particularly those with higher incomes. However, lower- and moderate-income households may pay a greater share of their income in state and local taxes in Texas than comparable households in California.

How Taxes Affect Homeownership Costs

For homebuyers, property taxes are an ongoing expense that should be considered alongside the purchase price and mortgage payment. Because property taxes vary by location and home value, two similarly priced homes can come with different annual tax bills.

When comparing homes, look at the estimated property taxes for the specific property rather than relying on statewide averages. Factoring that expense into your budget can give you a clearer idea of the true cost of owning the home.

The community matters, too. Coventry currently has Quick Move-In Homes across the Austin area, giving relocating buyers opportunities to compare homes in locations including Georgetown, Liberty Hill, Leander, Pflugerville, Round Rock and Kyle.

Making the Move from California to Central Texas

The biggest takeaway from a California vs. Texas taxes comparison is that Texas’ lack of an individual state income tax is only one piece of the financial picture. Property taxes, sales taxes and your individual circumstances should all factor into the decision.

If Central Texas is on your radar, Coventry Homes builds throughout the Austin area with new-home communities, a variety of floor plans and Quick Move-In Homes for different timelines. Explore Coventry’s Austin-area communities to find the home and location that make sense for your move.

FAQ

Does Texas have a state income tax?

No. Texas does not levy an individual state income tax, while California has a graduated income tax with rates that increase with income.

How do property tax rates compare between Texas and California?

California generally limits property taxes to 1% of assessed value, while Texas property taxes are determined by local taxing units and vary by location.

Which state has a lower overall tax burden?

It depends on the household. Income, property and sales taxes affect households differently, so neither state is automatically lower for everyone.

How do taxes affect the cost of homeownership?

Property taxes are an ongoing homeownership expense and vary based on factors such as taxable home value, location, local tax rates and applicable exemptions.