🌴 COUNTRY A California VS 🤠 COUNTRY B Texas

It depends on income. At $75,000 in non-Social Security retirement income: ~$3,800/year. At $100,000: ~$6,000/year. At $200,000: ~$17,000/year. However, Texas property taxes typically run $4,000–$8,000/year higher than a comparable California property protected under Prop 13. For retirees with moderate income and a long-held California home, the property tax increase may offset most of the income tax saving. For high-income retirees, the income tax saving dominates.

No. California is one of the states that fully exempts Social Security benefits from state income tax. This applies regardless of total income level. The California income tax — at rates up to 13.3% — applies to pension income, traditional IRA and 401(k) withdrawals, RMDs, and annuity payments. Retirees whose primary income is Social Security face minimal California state tax.

Proposition 13 caps California property tax assessments at the purchase price and limits annual increases to 2%. A Californian who bought their home in 1990 for $200,000 may be paying property tax on an assessed value of $400,000 today — while the market value is $1.2 million. Moving to Texas and buying a $600,000 home could generate $9,600/year in property tax versus $5,000/year in California. The longer a Californian has owned their home, the more valuable this Prop 13 protection becomes — and the less financially attractive a Texas move is on property tax.

No. California does not have a state estate tax or inheritance tax. Both California and Texas follow the federal estate tax threshold ($13.61 million per person in 2024). For most retirees, estate tax is not a differentiator between these two states. For very high-net-worth individuals, California does not impose additional state-level estate taxes.

California is the most aggressive state in auditing departing residents, particularly high earners. To end California residency, you must establish domicile in Texas: get a Texas driver's license, register to vote in Texas, update professional licenses and banking to Texas addresses, and spend fewer than 183 days in California. The California Franchise Tax Board (FTB) can audit you for years after the move, examining credit card records, healthcare visits, and days spent in California. A CPA experienced in California residency changes is essential for high-income retirees.

Yes. Traditional IRA withdrawals are taxed as ordinary income in California at the full progressive rate — up to 13.3% for high earners. There is no California exemption for IRA distributions. Roth IRA qualified distributions are generally not taxed. In Texas, neither traditional nor Roth IRA withdrawals face state income tax. For retirees planning large IRA withdrawals or facing substantial RMDs, the California tax on these distributions is a major cost.