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The no-state-income-tax pitch is the headline reason people move to Texas.
It’s real. But it’s also not the whole math on why moving to Texas doesn’t always lower your taxes.
Texas funds itself through property taxes, sales taxes, and a business franchise tax. Any of those can offset the income tax savings, depending on your situation.
There are also a handful of Texas-specific things, like MUD districts and the way used cars get taxed, that no one mentions at the closing table.
Here’s the full picture from a Fort Worth CPA who has helped a lot of people make this move.
Texas has no individual state income tax. No state estate tax. No state capital gains tax (because there’s no state income tax to attach one to).
For high earners and business owners, that gap is real.
Someone earning $400K with a state tax bill in the $30K to $50K range back home can come out tens of thousands ahead on the move alone.
The catch is what Texas taxes instead, and how aggressively.
DFW property taxes are among the highest effective rates in the country. Combined rates in Dallas, Tarrant, and Collin counties run roughly 1.7% to 2.5% of assessed value depending on the city and school district.
California, by comparison, caps its general property levy at 1% under Prop 13.
There’s a key Texas-specific offset. In 2023, Texas voters approved Proposition 4, which raised the residential homestead exemption from $40,000 to $100,000. That comes off your assessed value before tax. On a $700K home at a 2.2% effective rate, the exemption is worth about $2,200 a year.
You have to file for the homestead exemption with your county appraisal district. It is not automatic. Most movers don’t realize this the first year and lose the savings.
While we’re on property tax: you can also protest your appraised value every year.
The deadline is usually May 15 or 30 days after the appraisal notice, whichever is later. File Form 50-132 with your Appraisal Review Board. Most DFW homeowners who protest get some reduction.
But most homeowners don’t protest. That’s the gap.
This is the one no one tells you about. Two letters: MUD.
A Municipal Utility District is a special taxing district that funds water, sewer, and drainage in newer suburban developments outside city limits. MUD rates in DFW run roughly $0.19 to over $1.00 per $100 of assessed value, on top of your county and school district taxes. On a $700K home in a heavy-MUD area, that’s an extra $1,300 to $7,000 a year.
PIDs (Public Improvement Districts) work similarly but fund neighborhood amenities like parks, landscaping, and trails. They’re term-limited.
New construction in fast-growing DFW exurbs (parts of Frisco, Celina, Prosper, Anna, Forney) almost always sits in a MUD. Older established cities and infill neighborhoods usually don’t.
If you’re shopping new construction, ask the realtor for the full effective tax rate including any MUD or PID.
Realtors should disclose it. But some don’t.
Texas charges 6.25% state sales tax plus up to 2% local, for a max of 8.25%. Roughly in line with California and most large metros.
The Texas-specific quirk: Texas doesn’t tax most services.
Accountants, attorneys, hair stylists, lawn care, consulting, most professional services don’t have to collect sales tax on what they charge clients. (Service businesses still pay sales tax on stuff they buy.)
The other quirk catches movers: used vehicles.
When you buy a used car from a private party in Texas, you pay 6.25% sales tax on the greater of the purchase price or 80% of the vehicle’s Standard Presumptive Value (SPV), whichever is higher. The SPV is set by TxDMV based on regional sale prices. You can’t underreport the price to dodge tax. If you genuinely paid below SPV, you need a certified appraisal within 20 working days.
Bringing a vehicle from out of state? You pay a one-time New Resident Tax of $90 per vehicle in lieu of sales tax. You have 30 days from becoming a Texas resident to title and register.
Texas has no personal income tax, but it does have a franchise tax on businesses (also called the margin tax).
Most small businesses fall under the no-tax-due threshold of $2.65 million in annualized revenue for 2026 reports. Above that, the tax runs roughly 0.375% to 0.75% of margin depending on industry.
Important: even if you owe no tax, you still have to file a Public Information Report (or Ownership Information Report) annually with the Comptroller. Skip it and your LLC’s right to do business in Texas can be forfeited. That’s the part that catches owners moving from no-franchise-tax states.
For most owners we work with, the franchise tax itself isn’t a real cost. The compliance is.
Often, yes. State residency rules in California, New York, and New Jersey are aggressive, and they audit residency claims regularly.
If your LLC or S-corp is still legally formed in your old state, or you’re still earning revenue from clients there, that old state will keep taxing the relevant income. Moving your residence is not the same as moving your business sourcing.
The other big one: the convenience of the employer rule. Eight states (NY, NJ, CT, DE, NE, PA, AL, OR) treat your remote work days as if you were physically at the employer’s office, unless your employer formally required you to work elsewhere. If you moved from New York to Plano and you’re still on a New York payroll, you’re probably still paying New York state tax on those wages.
The fix is usually a real employment change: 1099 contractor structure, formal employer relocation of the role, or a true Texas-issued W-2. Not just changing your driver’s license.
States look at a basket of factors: where your driver’s license is, where your vehicles are registered, where you vote, where your kids go to school, where your doctors are, where you spend the most days.
The 183-day rule (more days in the new state than any other) matters, but it’s not the only thing. The deeper concept is domicile, meaning the place you intend to be your permanent home. That’s what high-tax states fight over.
If you’re trying to break residency from an aggressive state, do it cleanly. Move the whole life over, not just the address. Sell the old house if you can. Close old gym memberships. Move bank accounts. The states with the most aggressive enforcement will audit, and they’ll dig.
Run the numbers before, not after. The variables: your income, your old state tax bill, your housing math (including any MUD), where your business is sourced, your employer’s payroll situation, and how cleanly you can document the residency change.
The move tends to pay off when your old state tax bill was big, your job has no remote-work strings to the old state, your business sourcing actually shifts to Texas, and you’ve picked a low-MUD area (or accepted the property tax math going in).
The move doesn’t pencil as cleanly when your old state tax was modest, you’re walking into high property taxes plus MUD, you can’t get off the old state’s payroll, or your business stays operationally tied to your old state.
If the move is tax-driven, the difference between doing it right and kind of doing it is often tens of thousands of dollars a year, every year.
We help DFW owners moving from higher-tax states set up the move cleanly. Texas residency, business sourcing, property tax timing, MUD-aware home shopping, the whole picture.
If you’re planning a move, or you’ve already made one and you’re not sure what your real tax position looks like, get in touch with Adam Traywick.
We’ll run the numbers and tell you straight.
Good luck and happy moving! Until next time.
Adam Traywick, CPA is the President and founding CPA of Adam Traywick, LLC, a Adam Traywick CPA small-business accounting firm. He has over 20 years of experience helping small business owners across home-services trades, hair salons, real estate, and insurance agencies optimize taxes, run cleaner books, and avoid the surprises that come from once-a-year accountants.
