Texas Property Taxes and the Hidden Offset That Surprises Most Movers
Texas is the clearest example of how no-income-tax states make up the difference. Property tax rates in Texas rank among the highest in the nation — averaging around 1.60% to 1.80% of assessed value annually, compared to California’s capped rate of roughly 1.1% under Proposition 13. On a $400,000 home, that’s a difference of $2,000 to $2,800 per year going the other direction.
Tennessee, meanwhile, charges a combined state and local sales tax that can reach 9.75% — the highest average combined rate in the country. If you spend $60,000 a year on taxable goods and services, you’re paying roughly $5,850 in sales tax. Someone earning $100,000 in Illinois pays about $4,950 in state income tax. The math no longer obviously favors Tennessee.
Florida adds another wrinkle: property insurance. After years of hurricane damage and insurer exits from the market, average homeowners insurance premiums in Florida have climbed to over $3,600 per year — nearly three times the national average of around $1,300. For a retiree on a fixed income, that’s a significant recurring cost that no spreadsheet comparison of income tax rates will capture.
Washington State technically has no income tax, but it passed a 7% capital gains tax in 2022 on gains above $250,000. For investors and tech workers with stock compensation, that’s a meaningful carve-out from the “no tax” promise.
Who Actually Wins: 3 Income Profiles That Tell the Real Story
The answer to whether moving saves you money depends almost entirely on your income profile, spending habits, and the specific city you’re moving to — not just the state.
High earner with W-2 income ($200,000+): This is where no-income-tax states deliver the most unambiguous benefit. Moving from California to Nevada saves this person roughly $16,000 to $18,000 per year in state income taxes. Even after accounting for higher property taxes or sales taxes, the net savings are typically substantial. For this profile, the move is almost always worth it financially.
Middle-income household ($60,000–$100,000): The math gets murky. A family earning $80,000 in Illinois pays about $3,960 in state income tax. Moving to Texas saves that — but if they buy a $300,000 home, they’re paying roughly $5,400 per year in property taxes versus about $3,300 in Illinois. The “savings” can evaporate or even reverse depending on housing choices.
Retiree living on Social Security and IRA withdrawals: This is often the clearest win, especially when moving from states like Minnesota or Vermont that fully tax Social Security benefits. A retiree pulling $50,000 annually from an IRA in Minnesota faces a state tax bill of roughly $2,850. Moving to Florida or Tennessee eliminates that entirely, and the lower cost of living in many parts of those states amplifies the benefit.
The Real Cost of Moving: One-Time Expenses Most People Underestimate
Even when the long-term math works, the upfront cost of relocating can delay your break-even point by years. A cross-country move for a family of four typically costs between $4,000 and $10,000 in moving expenses alone. Add closing costs on a new home (typically 2%–5% of purchase price), real estate agent fees on your sold property (typically 5%–6%), and any overlap in housing costs, and you’re easily looking at $20,000 to $40,000 in transition expenses.
My client who moved from Illinois to Tennessee? Her moving costs, temporary housing, and closing fees totaled just over $28,000. At her income level, she was saving approximately $4,200 per year in state income tax. That means her break-even point was nearly seven years out — before accounting for Tennessee’s higher sales taxes eating into her monthly budget.
That doesn’t mean the move was wrong. She loved Nashville, her cost of living dropped in other ways, and quality-of-life factors mattered to her. But the pure tax math took far longer to pay off than her original spreadsheet suggested.
Wyoming and South Dakota: The 2 No-Tax States That Often Get Overlooked
While Texas and Florida dominate the conversation, Wyoming and South Dakota offer some of the most genuinely low-tax environments in the country — and without the population pressure driving up home prices in Austin or Miami.
Wyoming has no income tax, no corporate income tax, and relatively low property taxes averaging around 0.57% — among the lowest in the nation. The state funds itself largely through mineral extraction taxes. The tradeoff is limited urban infrastructure, harsh winters, and fewer job markets. For remote workers or retirees, it can be a genuine tax haven.
South Dakota similarly levies no income tax and no corporate income tax. Rapid City and Sioux Falls have grown steadily, and housing remains affordable compared to coastal metros. The state sales tax is 4.5% — well below Tennessee’s near-10% combined rate. For someone who prioritizes overall tax minimization rather than just income tax elimination, South Dakota deserves serious consideration.
How to Actually Run the Numbers Before You Pack a Box
Before making any decision, build a complete tax picture — not just an income tax comparison. Here’s what to include:
- State income tax on your specific income type (wages, retirement, capital gains)
- Property tax on the specific home you plan to buy, using the county assessor’s rate
- Sales tax estimated against your actual annual spending
- Homeowners and auto insurance quotes for the new location
- Cost of living differences in groceries, utilities, and healthcare
- One-time moving and transition costs amortized over your expected years of residence
Tools like the Tax Foundation’s state tax calculator, SmartAsset’s income tax estimator, and the Missouri Economic Research and Information Center’s cost-of-living index can help you build a realistic comparison. A CPA who specializes in multi-state taxation is worth the $300–$500 consultation fee before a major relocation decision.
Leave a Reply