Blog > No State Income Tax in Texas: What Moving to Houston Really Saves You (2026)
No State Income Tax in Texas: What Moving to Houston Really Saves You (2026)
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The short answer
- Texas has no state income tax on wages, retirement income or capital gains, and the Texas Constitution now bans one.
- A married couple earning $150,000 would pay roughly $5,200 to $7,200 a year in state income tax in California, New York, Illinois or Colorado. At $300,000, it's roughly $11,800 to $19,400, and more in New York City.
- The trade-off is higher property taxes: about 2% to 3.5% of value in the Houston area before exemptions.
- For most households moving from a high-tax state, the income tax savings are still larger than the extra property tax.
When people call me about moving to Houston, "no state income tax" is usually one of the first things they mention. It's real, and it can be a big number. But I always walk clients through the whole picture, because Texas collects its money in other ways, mainly through property taxes. Here's an honest comparison.
What "no state income tax" means in Texas
Texas doesn't tax personal income: not your paycheck, your bonus, your pension, your Social Security, your IRA withdrawals or your investment gains. In 2019, voters went a step further and amended the Texas Constitution to prohibit a state income tax. You still pay federal income tax like everyone else.
Instead, the state relies on sales tax (8.25% in Houston: 6.25% state plus 2% local) and local governments rely on property taxes, which fund schools, counties, cities and districts.
How much state income tax you'd save
Here's what a married couple filing jointly would owe in state income tax in 2026 on wage income, using each state's published brackets and standard deduction or exemption. These are rough estimates to show scale, not a tax return.
| State | Household income $150,000 | Household income $300,000 | Top rate |
|---|---|---|---|
| California | about $5,600 | about $19,400 | 13.3% |
| New York (state) | about $7,200 | about $16,750 | 10.9% |
| New York City (added on top) | about $5,000 | about $10,800 | 3.876% |
| Illinois | about $7,100 | about $14,600 | 4.95% flat |
| Colorado | about $5,200 | about $11,800 | 4.4% flat |
| Texas | $0 | $0 | None |
Estimates use 2026 brackets compiled by the Tax Foundation, the standard deduction (or Illinois' exemption) and no credits. Your actual tax depends on your deductions, credits and type of income.
A couple leaving New York City at $300,000 of income could keep about $27,500 a year that used to go to state and city income tax. That's real money: at today's mortgage rates, it's roughly the payment on $300,000 of additional house.
The trade-off: property taxes
Texas property taxes are among the highest in the country. In the Houston area, total rates usually run about 2.0% to 2.5% of value without a MUD and 2.8% to 3.5% with one, before exemptions. In California, Proposition 13 keeps the base rate at 1% of the purchase price, plus local add-ons that usually bring it to about 1.1% to 1.25%.
Homestead exemptions help a lot here. For 2026, a $400,000 home inside Houston city limits and Houston ISD with a homestead exemption pays about $5,700 a year. A $600,000 home there pays about $9,200. (I break down the math in my guide to Houston property taxes and MUD taxes.)
Two examples, side by side
| Â | Couple at $150,000, $400,000 home | Couple at $300,000, $600,000 home |
|---|---|---|
| California state income tax saved | about $5,600 | about $19,400 |
| Houston property tax (city and HISD, with homestead) | about $5,700 | about $9,200 |
| California property tax on the same price (about 1.15%) | about $4,600 | about $6,900 |
| Extra property tax in Houston | about $1,100 | about $2,300 |
| Net yearly difference | about $4,500 in your favor | about $17,100 in your favor |
The higher your income, the more Texas tends to win. And in practice, most people moving from coastal California also buy for much less here: the median single-family price in Greater Houston was $325,000 in September 2026, according to HAR.
Other costs to factor in honestly
- Homeowners insurance costs more here than in many states because of hail, wind and hurricane risk. Get quotes early.
- Flood insurance is worth pricing even outside mapped flood zones. See my Houston flood zone guide.
- MUD taxes in many suburbs add 0.5% or more to the rate.
- Sales tax of 8.25% is similar to or lower than many big cities elsewhere.
The federal SALT deduction is bigger right now
Because Texans don't pay state income tax, the main state and local tax many deduct is property tax (or sales tax instead). Under the 2025 federal tax law, the cap on that SALT deduction rose from $10,000 to $40,000 for 2025, with small increases through 2029, for households with income under about $500,000. If you itemize, that can take some of the sting out of a Texas property tax bill. It's scheduled to drop back to $10,000 in 2030. Ask your CPA how it applies to you.
Why so many people are moving here
The Houston metro added about 126,700 people from July 2024 to July 2025, the most of any U.S. metro, according to Census Bureau estimates. Taxes are part of it. So are jobs in energy, health care, the Port of Houston and aerospace, and the fact that a household income that feels tight in Los Angeles or New York buys a lot more house here.
If you're weighing a move, I'm happy to help you compare neighborhoods by commute, taxes and price. Our neighborhood guides cover 29 areas from the Inner Loop to the suburbs.
Texas income tax questions
Does Texas have a state income tax?
No. Texas doesn't tax personal income, including wages, retirement income and capital gains, and a 2019 constitutional amendment prohibits a state income tax.
Are property taxes higher in Texas?
Yes. Houston-area rates usually run about 2% to 3.5% of value before exemptions, compared with roughly 1.1% to 1.25% of the purchase price in California. Homestead exemptions lower the bill for owner-occupied homes.
Does Texas tax retirement income or Social Security?
No. Pensions, Social Security, 401(k) and IRA withdrawals aren't taxed by the state. Homeowners 65 and older also get extra property tax exemptions and a ceiling on school taxes.
How much would I save moving from California to Houston?
It depends on income and the home you buy. A married couple earning $150,000 saves about $5,600 a year in California income tax, and at $300,000 about $19,400, before accounting for higher Texas property taxes.
What is the sales tax in Houston?
8.25%: the 6.25% state rate plus 2% in local taxes.
Moving to Houston? Tell me where you work, your budget and what matters to you, and I'll send you a short list of neighborhoods with real tax and insurance numbers. Call or text (832) 777-3904 or send me a note.
Sources
- Tax Foundation: 2026 state income tax rates and brackets
- The Tax Adviser: the 2025 SALT cap changes
- HAR: Houston property tax rates
- Houston Agent Magazine: HAR September 2026 market update
- Census-based metro growth estimates, July 2024 to July 2025
- Texas Comptroller: sales and use tax
These are general estimates, not tax advice. Talk with a CPA about your situation.
About the author: Evan Compean is the founder of Compean Group, a Houston real estate team and brokerage at 802 W. Patton St. He has invested in Houston real estate since 2002, holds TREC license 617930, and has helped sell 1,000+ homes over 15 years. Why clients work with us.