Texas attracts buyers from higher-cost states partly because of its no-income-tax policy — a genuine financial benefit for high earners. But the property tax rates in Texas are among the highest in the country, partially offsetting that advantage and significantly affecting the monthly PITI for homeowners.
Here’s what the math actually looks like.
Texas Property Tax: The Key Variable
Texas has no state income tax and no statewide property tax — instead, property taxes are levied by local taxing authorities (county, city, school district, MUD, etc.). Effective rates vary significantly by county:
| County / Metro | Approximate effective property tax rate |
|---|---|
| Travis County (Austin) | ~1.8%–2.0% |
| Harris County (Houston) | ~2.0%–2.3% |
| Dallas County (Dallas) | ~2.0%–2.2% |
| Bexar County (San Antonio) | ~2.0%–2.3% |
| Tarrant County (Fort Worth) | ~2.0%–2.3% |
| Collin County (Plano/Frisco) | ~1.9%–2.1% |
At a 2.1% effective rate, a $350,000 home incurs $7,350 per year in property taxes — $613/month added to PITI. Compare this to California at 1.2% ($437/month on the same price) or Florida at 0.9% ($263/month on the same price).
This is why home prices in Texas can be significantly lower than California while monthly payments are closer than buyers expect: higher property taxes compress the payment advantage.
Income Required in Texas Markets
Using illustrative assumptions: 20% down, 7% rate, 2.1% tax rate, $150/month insurance.
| Market | Median home price | Est. monthly PITI | Annual income needed* |
|---|---|---|---|
| Houston | ~$320,000 | ~$2,500 | ~$80,000 |
| San Antonio | ~$280,000 | ~$2,200 | ~$70,000 |
| Dallas | ~$380,000 | ~$2,900 | ~$93,000 |
| Austin | ~$480,000 | ~$3,500 | ~$110,000 |
| Fort Worth | ~$330,000 | ~$2,550 | ~$82,000 |
*Approximate gross annual income assuming 36% front-end DTI and minimal other debts.
Austin, which saw dramatic price appreciation during 2020–2022, has partially corrected but remains more expensive than other major Texas metros. San Antonio and Houston offer lower entry price points.
The No-Income-Tax Advantage: How Much Does It Help?
Texas’s no-income-tax policy is most valuable for buyers with higher incomes. A household earning $150,000/year in California pays California state income tax (up to 12.3% marginal rate). The same household in Texas pays no state income tax.
For a $150,000 gross household income, moving from California to Texas might save $8,000–$15,000 per year in state income taxes, depending on deductions. This directly increases take-home pay and improves DTI (since DTI uses gross income, not take-home, the tax savings don’t directly change the lender’s calculation, but they increase disposable income after the mortgage payment).
For moderate incomes, the tax savings are smaller and the higher property taxes partially offset them.
Texas-Specific Buyer Considerations
MUD districts: Municipal Utility Districts are common in newer suburban developments around Houston, Austin, and Dallas. They add a separate property tax levy (sometimes 0.5%–1.5%) on top of other taxes to fund infrastructure. MUD tax rates should be verified before purchase — they’re sometimes excluded from advertised property tax estimates.
Homestead exemption: Texas offers a general homestead exemption of $100,000 off the assessed value for school district taxes (as of 2023 legislation). This reduces the taxable assessed value, somewhat lowering the property tax bill for primary residences.
Flood risk: Houston and surrounding areas have significant flood risk. FEMA flood maps show flood zones, but even areas outside mapped high-risk zones have flooded repeatedly. Flood insurance is required for federally backed loans in designated flood zones and is strongly advisable otherwise. Cost: $500–$2,000+/year depending on coverage and flood zone.
Fast-growing suburban markets: DFW suburbs (Frisco, McKinney, Allen, Allen, Prosper) have seen significant new construction. New homes in master-planned communities often include HOA fees of $50–$200/month. Factor these into PITI.
Running Your Texas PITI
The Affordability Calculator on LendingPulse lets you enter the specific property tax rate for the county and city you’re targeting — essential in Texas where rates vary meaningfully even within a metro area. Enter your income, debts, down payment, and local tax rate for a realistic payment estimate.
For the framework on how DTI and PITI interact to determine your maximum purchase price, see How Much House Can I Afford?