Texas has no state income tax. But the money comes from somewhere. Here's how to actually benefit.
Where Texas DOES tax you:
- Property tax: Texas average is 1.60% of assessed value. National average is 0.99%. Source: Tax Foundation. A $400K home in Frisco = ~$8,800/year in property taxes.
- Sales tax: 6.25% state + up to 2% local = 8.25% in most of DFW. Source: Texas Comptroller.
- Gas tax: $0.20/gallon (among the lowest nationally)
How to maximize the income tax advantage:
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Remote work arbitrage. If you work remotely for a company in a high-tax state (CA, NY), you earn California salaries with zero state income tax. This is worth $5,000-15,000/year depending on income.
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Max out pre-tax retirement contributions. 401(k): $23,500/year (2026 limit). IRA: $7,000/year. No state tax means more net pay to invest.
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Property tax protest. File a protest with your county appraisal district EVERY year. In Dallas County, 65% of protests result in a reduction. Source: DCAD annual report.
- Dallas: DCAD (dallascad.org) — deadline May 15
- Tarrant: TAD (tad.org) — deadline May 15
- The protest is free. You can do it online. Average savings: $500-1,500/year.
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Homestead exemption. File for it immediately after buying. It exempts $100,000 from school district taxes (as of 2023 Prop 4). Also caps assessed value increases at 10%/year for school taxes.
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Sales tax deduction on federal return. Texas residents can deduct state/local sales tax instead of income tax on federal Schedule A. Use the IRS sales tax calculator.
Sources:
- Tax Foundation — state property tax comparison
- Texas Comptroller — sales tax rates
- DCAD/TAD — property tax protest process
- IRS — sales tax deduction (Schedule A)
- Texas Tax Code Chapter 11 (homestead exemption)
Protest your property taxes. Every single year. It's free money.