California vs Texas Taxes
Compare the total tax burden between California (1% – 13.3%) and Texas (no income tax). Enter your income to see which state saves you more.
California vs Texas: The biggest tax migration in America
California and Texas represent the defining tax rivalry of modern American migration. Between 2018 and 2023, over 750,000 people moved from California to Texas, making it the single largest interstate migration corridor in the country. The reason is straightforward on paper: California levies the nation's highest marginal income tax rate at 13.3% on incomes above $1 million, while Texas collects zero state income tax.
But the full picture is more nuanced than "Texas is cheaper." Texas compensates for its lack of income tax with property tax rates that average 1.60%—nearly double California's 0.71% effective rate. For a homeowner with a $500,000 property, that gap alone is worth $4,450 per year in Texas's disfavor. Sales tax is also slightly higher in many Texas cities. The real savings depend heavily on whether you rent or own, your income level, and which cities you're comparing.
The migration has reshaped both states' economies. Austin has become a secondary tech hub, with companies like Tesla, Oracle, and HP Enterprise relocating headquarters. Meanwhile, California has responded with policy discussions around wealth taxes and exit taxes. For workers earning over $200,000, the income tax savings of moving to Texas can exceed $15,000 annually—enough to offset the higher property taxes and then some.
Key Differences Beyond Income Tax
| Category | California | Texas |
|---|---|---|
| Property Tax | Effective rate ~0.71%, with Prop 13 limiting annual increases to 2% | Effective rate ~1.60%, no cap on assessment increases, reassessed frequently |
| Sales Tax | Base rate 7.25%, combined rates up to 10.75% in some cities | Base rate 6.25%, combined rates up to 8.25% in most metro areas |
| Cost of Living | Housing costs 2-3x the national average in major metros; groceries and utilities above average | Housing roughly at national average outside Austin; overall cost of living 8-10% below California |
| Retirement Income | All retirement income (401k, IRA, pensions) is taxed as ordinary income at state rates | No state income tax on any retirement income |
| Business Taxes | Corporate tax rate of 8.84%; franchise tax minimum $800/year even for LLCs with no revenue | No corporate income tax, but franchise (margin) tax of 0.375%-0.75% on revenue above $2.47M |
Who Benefits from Moving?
High-earning tech workers
Remote workers earning $200K+ save $12,000-$25,000 annually in state income tax by moving to Texas. If you can keep your California salary while working remotely from Austin or Dallas, the math is overwhelmingly in Texas's favor.
Retirees with significant savings
Retirees drawing $80K+ from 401k/IRA accounts save substantially in Texas, where none of that income is taxed at the state level. The property tax difference matters less if you're downsizing.
Small business owners
California's $800 minimum franchise tax and 8.84% corporate rate hit small businesses hard. Texas's margin tax only kicks in above $2.47M in revenue, making it far more startup-friendly.
Bottom line: For a single filer earning $150,000, the move from California to Texas saves roughly $9,500 in state income tax annually—but a more expensive home could claw back $3,000-$5,000 of that in higher property taxes.
Tax at Different Income Levels
| Income | California Total Tax | Texas Total Tax | Annual Savings |
|---|---|---|---|
| $75,000 | $15,887 | $13,687 | Save $2,200 |
| $100,000 | $25,477 | $21,099 | Save $4,378 |
| $150,000 | $45,570 | $36,542 | Save $9,028 |
| $200,000 | $64,563 | $50,885 | Save $13,678 |
Based on single filer, standard deduction, 2025 tax year. Includes federal income tax, state income tax, and FICA.
Why the difference
You'd save $4,378/year ($365/month) in Texas vs California.
Tax structure
California uses progressive brackets up to 13.3%, while Texas has no state income tax.
Effective rate at your income
At $100,000, Texas's effective state rate is 0.0% vs 4.4% in California — a 4.4 percentage point gap.
Tip: California's progressive brackets mean your effective rate is much lower than 13.3% for most earners. At $100,000, the effective state rate is approximately 5.8%. Consider maximizing 401(k) contributions and HSA to reduce California-taxable income.
Tip: While you save on income tax, Texas property taxes can exceed $5,000-$10,000/year on a median-priced home. Factor in property tax when comparing total tax burden against income-tax states where property taxes may be lower.
Understanding Each State
California
California has the highest top marginal state tax rate in the US at 13.3%, with progressive brackets starting at 1%. An additional 1% Mental Health Services Tax applies to incomes over $1 million. Despite high taxes, California's economy — tech, entertainment, agriculture — attracts top talent globally. Under OBBBA (2025+), the SALT deduction cap rose to $40,000 ($20,000 MFS) but phases out $1-for-$1 above $500,000 MAGI ($250,000 MFS) toward a $10,000 floor — so high-income California itemizers see only partial federal relief.
Tip: California's progressive brackets mean your effective rate is much lower than 13.3% for most earners. At $100,000, the effective state rate is approximately 5.8%. Consider maximizing 401(k) contributions and HSA to reduce California-taxable income.
Texas
Texas has no state income tax, relying instead on property taxes (among the highest in the US at ~1.6-1.8% of home value) and an 8.25% combined sales tax in most areas. For wage earners, the absence of income tax is a major advantage, but property owners face a significant ongoing cost.
Tip: While you save on income tax, Texas property taxes can exceed $5,000-$10,000/year on a median-priced home. Factor in property tax when comparing total tax burden against income-tax states where property taxes may be lower.
Key Comparison Points
Income tax structure: California has a progressive income tax (1% – 13.3%), while Texas has no state income tax.
Beyond income tax: State tax comparisons should also consider property tax rates, sales tax, and cost of living. A state with no income tax may have higher property or sales taxes that offset the savings.
SALT deduction cap: Under OBBBA (2025+), the federal SALT cap is $40,000, phasing out above $500,000 MAGI toward a $10,000 floor. This limits the federal tax benefit of living in a high-tax state, so the gross state tax difference remains close to the net difference for most earners — especially high earners inside the phaseout.
Frequently asked questions
Is it cheaper to live in California or Texas?
Based on income tax alone, Texas has a lower tax burden. At $100K income, you'd save $4,378 annually in Texas compared to California. However, total cost of living also depends on property taxes, sales taxes, and housing costs.
How much would I save moving from California to Texas?
A single filer earning $100,000 would save approximately $4,378 per year in total taxes by living in Texas instead of California. At $150,000 income, the savings change to $9,028 per year.
What is the income tax rate in California?
California has a progressive income tax with rates of 1% – 13.3%.
What is the income tax rate in Texas?
Texas has no state income tax.
Does Texas have income tax?
No, Texas does not levy a state income tax. Residents pay only federal income tax and FICA. However, Texas may have higher property taxes or sales taxes to compensate.