Moving to Texas Taxes: What to Know Before You Relocate in 2026

Texas is one of only nine states with no personal income tax, and that single fact drives thousands of relocations to the Dallas-Fort Worth area every year. But “no income tax” does not mean “no taxes.” Before you pack the moving truck, you need to understand how Texas actually collects revenue, what changes on your federal return, and where new residents get tripped up. This guide covers everything: property taxes, sales taxes, franchise tax for business owners, and the federal filing details most people overlook.

If you want to talk through your specific situation before or after your move, book a free consultation with Al Freideman, CPA. Al has helped hundreds of individuals and business owners relocate to Dallas over 30+ years of practice.

What Does “No State Income Tax” Actually Mean?

Texas does not levy a personal income tax on wages, self-employment income, investment gains, retirement distributions, or any other form of individual earnings. Article VIII, Section 1-e of the Texas Constitution prohibits a personal income tax unless voters approve it by referendum. That means you keep 100% of what you earn at the state level.

For context, if you are moving from California (top rate 13.3%), New York (top rate 10.9%), or Illinois (flat 4.95%), the savings can be substantial. A household earning $250,000 in California could owe roughly $15,000 to $20,000 in state income tax. In Texas, that bill is zero.

However, Texas replaces that revenue through other channels. Understanding those channels prevents surprises in your first year as a Texas resident.

Property Taxes in Texas: The Trade-Off Most People Miss

Texas has some of the highest property tax rates in the country. The statewide effective rate averages around 1.60% to 1.80% of assessed value, compared to the national average of roughly 1.10%. In Dallas County specifically, the combined rate (county, city, school district, and special districts) typically lands between 1.80% and 2.20% depending on your exact location.

Here is what that looks like in real dollars:

• A home valued at 0,000 in Plano could generate a property tax bill of $7,200 to $8,800 per year
• A home valued at 0,000 in Frisco might produce a bill of $10,800 to $13,200 per year
• A home valued at $800,000 in Dallas proper could result in $14,400 to $17,600 per year

Texas does offer a homestead exemption that reduces your taxable value. As of 2026, the general homestead exemption for school district taxes is $100,000, and homeowners age 65 or older qualify for an additional $10,000 exemption. You must file for the homestead exemption with your county appraisal district in the year after you purchase your home. Do not skip this step: it can save you $1,500 or more annually.

One important note: Texas assesses property taxes based on market value, and appraisal districts revalue properties every year. If your home appreciates significantly, your tax bill rises with it. You have the right to protest your appraisal each spring, and many Dallas-area homeowners do exactly that.

Texas Sales Tax and Use Tax: What New Residents Should Expect

Texas charges a 6.25% state sales tax, and local jurisdictions add up to 2.00% on top. In most of the DFW metro area, you will pay the maximum combined rate of 8.25% on taxable purchases. Groceries (unprepared food) and prescription medications are exempt from Texas sales tax, but restaurant meals, clothing, electronics, and most other goods are fully taxable.

If you are a business owner, sales tax compliance becomes your responsibility. Texas requires businesses that sell taxable goods or services to collect sales tax from customers, file returns (monthly, quarterly, or annually depending on volume), and remit the funds to the Texas Comptroller. Missing a filing or underpaying triggers penalties and interest. This is an area where many new business owners in Dallas run into trouble during their first year. Our sales tax filing and compliance services can keep you current with the Comptroller from the start.

Moving to Texas Taxes for Business Owners: The Franchise Tax

While Texas has no personal income tax, it does have a business-level tax called the Texas Franchise Tax (sometimes called the margin tax). This applies to most entities doing business in Texas, including LLCs, S-Corps, partnerships, and corporations. Sole proprietors operating without a formal entity are generally exempt.

Here is how the franchise tax works in 2026:

• Businesses with total revenue under $2.47 million owe no franchise tax (the “no tax due” threshold), but they still must file the Public Information Report and the No Tax Due Report annually
• Businesses above that threshold pay 0.375% of taxable margin for retail and wholesale businesses, or 0.75% for all other businesses
• The filing deadline is May 15 each year
• New entities must file their first report in the calendar year after they form

If you are relocating a business to Texas or forming a new LLC after your move, do not ignore the franchise tax filing requirement. Even if you owe $0, failing to file can result in your entity being involuntarily terminated by the Texas Secretary of State. We handle Texas LLC formation and franchise tax filings for clients across Dallas, Plano, Frisco, Allen, McKinney, and Richardson.

Your Federal Tax Return Still Changes When You Move

New Texas residents sometimes assume their federal return stays the same since there is no state return to file. That is not quite right. Several things change on your federal Form 1040:

• State and local tax (SALT) deduction: If you previously deducted state income tax on Schedule A, that deduction disappears. However, you can now deduct property taxes and state sales taxes instead, subject to the $10,000 SALT cap that remains in effect for 2026
• Part-year state returns: In the year you move, you likely owe a part-year return to your former state for income earned while you were still a resident there. The exact rules depend on your departure state, and some states (like California and New York) are aggressive about claiming you remained a resident if you maintained ties
• Retirement income: If you receive a pension or retirement distributions, the federal tax treatment is unchanged, but you no longer owe state tax on those distributions. For retirees, this is often the single biggest financial benefit of moving to Texas
• Estimated tax payments: You can stop making state estimated payments, but your federal estimated payment schedule (April 15, June 15, September 15, January 15) still applies if you have self-employment income, investment income, or other non-withheld earnings

The part-year return is where most people need professional help. If you are moving from a high-tax state, getting the residency transition right on both your former state return and your federal return can save you thousands. Our tax preparation services cover exactly this scenario.

Common Mistakes New Texas Residents Make

After 30+ years of helping clients settle into Dallas-Fort Worth, Al Freideman has seen the same mistakes repeat. Avoid these:

1. Not filing for the homestead exemption. You must file with the county appraisal district. It is not automatic. The deadline is April 30 of the year following your home purchase.
2. Assuming “no income tax” means lower overall taxes. Between property taxes and sales taxes, your total tax burden in Texas may be similar to your former state, especially at lower income levels. The savings are most dramatic for high earners.
3. Keeping financial ties to your former state. States like California, New York, and New Jersey will continue to claim you as a resident (and tax you) if you maintain a home, driver’s license, voter registration, or other ties there. Cut those ties cleanly.
4. Forgetting franchise tax filings for your business. Even if you owe zero tax, the annual filing is mandatory. Miss it and your LLC can be forfeited.
5. Not updating withholding at your employer. Your employer should stop withholding state income tax once you establish Texas residency. Verify this on your first paycheck after the move.

Key Takeaways

• Texas has no personal income tax, but property taxes average 1.60% to 2.20% of home value in the DFW area, which can produce a bill of $7,000 to $17,000+ depending on your home’s value
• Sales tax in Dallas-Fort Worth is 8.25% on most purchases, and business owners must collect, file, and remit sales tax to the Texas Comptroller
• The Texas Franchise Tax applies to LLCs, S-Corps, and other entities. Businesses under $2.47 million in revenue owe no tax, but still must file annually by May 15
• Your federal return changes when you move: you lose the state income tax deduction, may owe a part-year return to your former state, and should update withholding immediately
• File for the Texas homestead exemption by April 30 of the year after you purchase your home, as it can save you $1,500 or more per year

Frequently Asked Questions

Do I still need to file a tax return with my old state after moving to Texas?

In most cases, yes. You will owe a part-year resident return to your former state covering income earned while you lived there. Some states, particularly California and New York, apply strict rules for determining your departure date. Keep documentation of your move date, new lease or home purchase, updated driver’s license, and voter registration change.

How much will I save by moving to Texas from a state with income tax?

Savings depend on your income level and former state’s tax rate. A household earning $300,000 moving from California (top rate 13.3%) could save $20,000 or more in state income tax annually. However, higher Texas property taxes offset some of that savings, especially for homeowners with properties valued above $500,000.

Does Texas tax retirement income or Social Security?

Texas does not tax any form of income, including pensions, 401(k) distributions, IRA withdrawals, and Social Security benefits. Federal taxes on these sources still apply based on IRS rules, but the state-level tax is zero.

When do I become a Texas resident for tax purposes?

Texas considers you a resident once you establish domicile here, meaning you intend Texas to be your permanent home. The more important question is when your former state stops claiming you. Establish Texas ties quickly: get a Texas driver’s license, register to vote, update your vehicle registration, and sever ties with your old state as cleanly as possible.

Need Help? Talk to a Dallas CPA

Relocating to Texas involves more than just packing boxes. Getting the tax transition right, especially the part-year return to your former state, the homestead exemption filing, and any business entity setup, can save you thousands of dollars and prevent headaches with both state and federal tax authorities.

At AG Freideman, we help individuals and business owners who are new to Dallas-Fort Worth get their finances set up correctly from day one. Al Freideman has 30+ years of experience and handles every client personally. With 52+ five-star Google reviews and transparent pricing, you will know exactly what to expect. Book your free consultation or call (972) 893-3481 to talk through your move.