When evaluating where to live, many homeowners focus on a single headline number: "Does this state have income tax?" But the smarter question is: what is my total annual tax burden — income tax, property tax, and sales tax combined?
States that eliminate income tax must fund their governments some other way. Texas, New Hampshire, Nevada, and Florida all have no broad state income tax. But Texas offsets this with above-average property taxes. New Hampshire — which also has no broad sales tax — relies heavily on some of the highest property tax rates in the United States. Only Florida threads the needle with relatively low property taxes alongside no income tax, making it genuinely favourable for many homeowners.
On the other side, California levies income tax up to 13.3%, but its 1978 Proposition 13 law caps assessed value increases at 2% per year for long-term owners — meaning a California homeowner who bought in 2005 may pay a far lower effective property tax rate than a new buyer in Texas. New York City taxes Class 1 residential property under a separate fractional-assessment system, while suburban Nassau and Westchester counties are widely reported to be among the most expensive property tax locations in the country.
This guide breaks down the true total tax picture for homeowners across six major states, explains the SALT deduction offset, and helps you calculate your own burden — especially if you are considering a move.
Every state must fund schools, roads, police, and public services. The question is not whether you pay — it is how you pay. States use three primary levers:
When a state removes income tax, it typically shifts the burden toward property and/or sales taxes. The critical insight for homeowners: property tax is unavoidable regardless of your employment status, retirement status, or whether you have a mortgage. Income tax, by contrast, disappears in retirement for many people if their income is Social Security and qualified retirement withdrawals from Roth accounts.
Consider two homeowners:
The Texas homeowner may actually save money overall — but only because the property tax difference at this home value is modest. At higher home values, the calculus shifts. And for retirees with no earned income, the income tax advantage of Texas or Florida disappears entirely, leaving only the property tax burden.
Texas and New Hampshire are the clearest examples of states that eliminate income tax but load significant costs onto homeowners through property taxes.
The Texas Constitution (Article VIII, Section 24-a) prohibits a state income tax. Texas funds local government almost entirely through property taxes set by county appraisal districts, school districts, and municipal governments. The statewide effective rate is approximately 1.40% of home value before exemptions, though individual counties vary.
Texas offers a homestead exemption that reduces the taxable assessed value. As of tax year 2025, the general homestead exemption is $140,000 from school district taxes (raised from $100,000; homeowners 65+ or disabled get an additional $60,000). However, the base assessed value continues to rise with market values, and Texas has no strict cap equivalent to California's Prop 13 — though there is a 10% annual cap on increases to the taxable assessed value for homestead properties.
| Home Value | Estimated Annual Tax (before exemption) | Estimated Annual Tax (after $140k exemption; ~$1,400 saved at an illustrative 1.0% school rate) |
|---|---|---|
| $250,000 | $3,200–$3,800 | $1,800–$2,400 |
| $350,000 | $4,500–$5,300 | $3,100–$3,900 |
| $500,000 | $6,400–$7,600 | $5,000–$6,200 |
| $750,000 | $9,500–$11,500 | $8,100–$10,100 |
For a Texas homeowner earning $150,000/year, paying zero state income tax is a significant benefit — potentially saving $8,000–$12,000 versus California or New York. But for a retiree living on Social Security and Roth IRA withdrawals (taxable income near zero in most states), that income tax saving disappears, leaving only the property tax cost.
New Hampshire is unique: no tax on wages, no broad sales tax, and its former 3% tax on interest and dividend income was repealed effective 1 January 2025. This sounds ideal. But NH funds virtually all local services — including some of the highest-spending public school systems in the region — through property taxes.
New Hampshire's effective property tax rates are consistently ranked among the top 5 highest in the US, at approximately 1.50% statewide, with some towns (Claremont, Berlin, Manchester) running higher.
| Home Value | Effective Rate | Estimated Annual Tax |
|---|---|---|
| $300,000 | ~1.50% | ~$4,500 |
| $400,000 | ~1.50% | ~$6,000 |
| $600,000 | ~1.50% | ~$9,000 |
For retirees or remote workers moving from Massachusetts (income tax 5%), NH's property tax can still exceed what they save on income tax if they own a higher-value home, though the gap is narrower than the top-3-highest framing once suggested. A retiree with $60,000/year in income saving ~$2,700 in MA income tax but paying meaningfully more in NH property tax versus a comparable MA property may not come out ahead.
Florida is the exception that makes the 'no income tax equals high property tax' rule look incomplete. Florida has no state income tax and — for long-term homestead residents — relatively manageable property tax through the Save Our Homes (SOH) assessment cap.
Florida's Save Our Homes amendment (Article VII, Section 4 of the Florida Constitution) limits annual increases in the assessed value of a homestead property to the lesser of 3% or the Consumer Price Index. In a rapidly appreciating market, this means a long-term Florida homeowner's taxable assessed value can fall far below market value.
Florida also offers a $50,000 homestead exemption on assessed value for primary residence owners (first $25,000 applies to all taxes; second $25,000 applies to non-school taxes only).
Effective property tax rates on Florida homestead properties are approximately 0.78% statewide, though the rate on the assessed value (which may be well below market value for long-term owners) makes the real burden lower still for long-tenured owners. Estimated annual property taxes on a $350k Florida homestead: approximately $2,100–$3,150/year.
The SOH cap does not apply to investment properties, vacation homes, or recently purchased homes. New buyers in Florida pay on market value until the SOH cap builds up over years. Florida also has no cap on non-homestead properties, meaning landlords and second-home owners pay at the full market-value-assessed rate.
Florida is genuinely low-tax for long-term primary homeowners — but the advantage is built gradually over time. A new buyer moving to Florida does not immediately get the low-tax benefit that a 20-year resident enjoys.
California charges the highest state income tax rate in the nation (13.3% above $1 million; 9.3% on taxable income above $75,197 for single filers in 2026). Yet for long-term homeowners, California's property tax can be surprisingly manageable — thanks to Proposition 13.
California Proposition 13 limits the taxable assessed value of real property to:
This means a California homeowner who bought their home in 2005 for $600,000 has a taxable assessed value in 2026 of approximately $600,000 × (1.02)^21 ≈ $909,000 — while the market value of that same home may be $1.4–$1.8 million in many California markets. Their property tax bill reflects the lower assessed value.
The base California property tax rate is 1% of assessed value (plus voter-approved local bonds, typically 0.2–0.5% additional, and Mello-Roos special taxes in newer developments).
| Scenario | Purchase Price | 2026 Market Value | Prop 13 Assessed Value | Estimated Annual Tax |
|---|---|---|---|---|
| New buyer (2026) | $900,000 | $900,000 | $900,000 | ~$10,350–$11,700 (with local bonds) |
| 2015 buyer | $700,000 | $1,200,000 | ~$870,000 | ~$10,000–$11,300 |
| 2005 buyer | $550,000 | $1,400,000 | ~$834,000 | ~$9,600–$10,800 |
| 1995 buyer | $300,000 | $1,400,000 | ~$554,000 | ~$6,400–$7,200 |
| 1985 buyer | $150,000 | $1,400,000 | ~$338,000 | ~$3,900–$4,400 |
A long-term California homeowner paying roughly $3,900–$4,400/year in property tax on a home worth $1.4 million is in a structurally different position than a new Texas buyer paying roughly $10,500/year (1.40% effective rate) on a $750,000 home. But they are still paying state income tax at high rates on earned income.
New York City taxes Class 1 residential property (single-family and 1–3 family homes) under a separate classification and fractional-assessment system, so rates quoted on assessed value are not comparable to effective rates on market value. Statewide, the average effective rate is 1.30% (Tax Foundation, 2024 data).
New York's suburban counties — Nassau, Westchester, and Rockland — are widely reported to have some of the highest property tax bills in the US; check your county and school district for actual figures. Combined with New York state income tax (up to 10.9%) and NYC city tax (if you also work in the city), the total burden for suburban NY commuters is among the heaviest in the country.
New Jersey is the cautionary tale for homeowners evaluating state tax burdens. It combines:
For a New Jersey homeowner earning $200,000 and owning a $500,000 NJ home:
This is before any federal tax. New Jersey's burden is particularly painful for middle-income homeowners who earn too much to qualify for NJ's property tax relief programs but do not earn enough to benefit meaningfully from itemizing all deductions.
New Jersey does offer some relief mechanisms:
These programs provide partial relief but does not fundamentally change NJ's position as one of the more expensive states for homeowner tax burden.
The State and Local Tax (SALT) deduction allows federal itemizers to deduct certain state and local taxes paid. This provides partial federal tax relief for homeowners in high-tax states like New Jersey, New York, Illinois, and California.
Under the One Big Beautiful Bill Act (OBBBA, 2025), which replaced the Tax Cuts and Jobs Act's $10,000 limit, the SALT deduction for 2026 is capped at $40,400 per return (the cap phases down for taxpayers with income above $505,000). This cap applies to the combined total of:
For a NJ homeowner with $14,000 in state income tax and $12,000 in property tax ($26,000 combined), the full $26,000 is deductible against federal income under the $40,400 cap, saving approximately $6,240/year in federal tax at the 24% bracket. This is meaningful but does not fully offset the NJ burden.
Source: IRS Topic No. 503 — Deductible Taxes. See irs.gov/taxtopics/tc503.
The income-tax-versus-property-tax trade-off looks fundamentally different for retirees compared to working-age homeowners.
In retirement, many common income sources are taxed differently — or not at all at the state level:
A retiree in Florida with $80,000 in annual income (Social Security + IRA withdrawals) saves $0 in state income tax compared to being in Florida instead of Texas — because both have no income tax. Their decision comes down entirely to property tax, sales tax, and cost of living.
For retirees on fixed incomes, property tax is particularly burdensome because it is:
A retiree choosing between New Hampshire (~$6,000/year property tax on a $400k home, no income tax) and Massachusetts (~$4,000/year property tax and about $2,700 of state income tax on $60k, so ~$6,700 combined) will often find New Hampshire cheaper overall on a like-for-like home value — though Massachusetts offers a Senior Circuit Breaker Tax Credit for low-to-moderate income seniors that can narrow or close the gap.
| State | SS Exempt? | Pension Exempt? | IRA/401k Taxed? | Property Tax Burden |
|---|---|---|---|---|
| Florida | N/A (no income tax) | N/A | N/A | Low–Moderate (with SOH cap) |
| Texas | N/A (no income tax) | N/A | N/A | Above-average |
| New Hampshire | N/A (no income tax)* | N/A | N/A | Very High |
| California | Yes (exempt) | No (taxed) | Yes (taxed) | Low for long-term owners (Prop 13) |
| New York | Yes (exempt) | Partially | Yes (taxed) | Moderate NYC; Very High suburbs |
| New Jersey | Yes (exempt) | Partially (pension exclusion) | Yes (taxed) | Very High (national highest average) |
*NH's former interest and dividends tax was repealed effective 1 January 2025.
To make an informed decision about where to live, you need to calculate your total annual tax burden — not just one component. Here is the framework:
Use the state's income tax tables applied to your expected taxable income. Include all expected sources: wages, business income, traditional IRA/401(k) withdrawals, capital gains, dividends. Many states have their own exemptions and deductions that differ from federal rules.
Take the expected purchase price (or current assessed value) and multiply by the effective property tax rate for the specific county or city you are considering — not just a statewide average, as rates vary substantially within states. Account for any homestead exemption you will qualify for.
Example: $450,000 home in Texas at the statewide average effective rate of 1.40% (Tax Foundation): about $6,300 a year before exemptions, or about $4,900 after the $140k homestead exemption (about $1,400 of school-tax savings at an illustrative 1.0% school rate).
Estimate your annual taxable spending (total spending minus housing, utilities, groceries in states that exempt them). Multiply by the combined state + local sales tax rate in your area. Tennessee, Louisiana, Arkansas, and Washington State have the highest combined sales tax rates (often 9–10%+). New Hampshire and Oregon have no sales tax.
Add your state income tax and property tax (up to the $40,400 SALT cap). If you itemize and this sum exceeds your standard deduction room available, you will get federal tax relief at your marginal federal rate. At 22% federal bracket: every $1,000 of deductible SALT saves $220 in federal tax.
Add the three taxes together, subtract the federal SALT offset if applicable, and compare across the states you are considering. The result — not any single tax type — is your true annual cost of state and local taxation as a homeowner.
| State | State Income Tax | Est. Property Tax | Est. Sales Tax | SALT Deduction Offset* | Net Annual Burden |
|---|---|---|---|---|---|
| Texas | $0 | ~$7,000 | ~$1,800 | ~$1,540 | ~$7,260 |
| Florida | $0 | ~$3,900 | ~$1,500 | ~$860 | ~$4,540 |
| New Hampshire | $0 | ~$7,500 | $0 | ~$1,650 | ~$5,850 |
| California | ~$14,200 | ~$6,000 (new buyer) | ~$1,500 | ~$4,440 | ~$17,260 |
| New York (NYC) | ~$19,000 (state+city) | ~$7,000 | ~$1,200 | ~$5,720 | ~$21,480 |
| New Jersey | ~$10,550 | ~$9,400 | ~$1,600 | ~$4,390 | ~$17,160 |
*SALT offset estimated at 22% federal bracket on deductible amount (up to the $40.4k cap). Calculations are illustrative estimates only; individual circumstances vary.
This framework reveals why Florida is so attractive for middle-to-high earners who own median-value homes: it genuinely has both low income tax and moderate property tax — unlike New Hampshire, which trades one for the other.
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