Understanding Property Tax Differences Between California and Texas

If you’re considering buying property in California or Texas—whether as a homebuyer or real estate investor—understanding how property taxes work is critical. Property tax laws vary significantly between states, and the differences between California and Texas can dramatically affect your bottom line.

In this article, we break down the property tax differences between California and Texas, what they mean for your investment strategy, and how to plan for long-term ownership.

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TLDR – Quick Guide

• California has lower property tax rates (avg. 0.75%) but higher home prices
  
• Texas has higher property tax rates (avg. 1.6%–2.0%) but lower home prices
  
• California limits annual tax increases via Proposition 13
  
• Texas reassesses property values annually, which can lead to rising taxes
  
• Know local laws before investing—taxes impact cash flow and ROI

The Basics: How Property Taxes Work

Property taxes are based on the assessed value of a property, multiplied by the local tax rate (also known as the mill rate). These taxes fund local services like schools, infrastructure, and emergency response.

Each state determines:

• How property is assessed
  
• How often it’s reassessed
  
• What exemptions or caps exist
  
• How much control local governments have over rates
  

California Property Taxes: Low Rate, High Valuation

Average Property Tax Rate: 0.75% statewide average

Key Factors:

• Proposition 13: Passed in 1978, it caps property tax rates at 1% of assessed value and limits annual increases in assessed value to 2%, unless the property is sold or significantly improved.
  
• Assessed Value: Based on purchase price, not market value—until the property changes hands.
  
• Home Prices: Significantly higher than national average. Median home prices often exceed $700,000 in urban coastal areas.
  

Bottom Line: You’ll pay a smaller percentage, but on a much larger home value. Long-term owners benefit most from Prop 13 protections.

Texas Property Taxes: High Rate, Lower Entry Point

Average Property Tax Rate: 1.6% to 2.0%, depending on county

Key Factors:

• Annual Reassessment: Properties are reassessed every year at or near market value. This can lead to rising tax bills, especially in appreciating markets.
  
• Local Control: School districts, cities, counties, and utility districts all add to the total rate.
  
• No State Income Tax: Texas offsets the lack of income tax by collecting more through property taxes.
  
• Home Prices: More affordable. Coastal homes in Galveston or Corpus Christi often range between $300,000–$600,000.
  

Bottom Line: You’ll pay more annually in taxes as a percentage, but homeownership is more accessible and predictable in terms of valuation.

Example Comparison

Feature	California	Texas
Avg. Property Tax Rate	0.75%	1.6%–2.0%
Assessment Frequency	At sale or improvement	Annually
Property Value Growth Cap	2% (Prop 13)	None
Home Price (coastal avg)	$700K+	$300K–$600K
State Income Tax	Yes (up to 13.3%)	No

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How Property Taxes Affect Investors

In California:

• Great for buy-and-hold investors who plan to keep properties for decades
  
• Limited annual tax increases = more predictable long-term cash flow
  
• Higher acquisition cost impacts short-term ROI
  

In Texas:

Works well if paired with strong rental demand and short-term profitability

Better for cash flow investors looking for lower entry points

Higher taxes can reduce margins—especially if appreciation drives up assessments annually

Key Takeaways

• California offers long-term tax protection but higher upfront costs
  
• Texas has higher tax rates but more affordable entry into property ownership
  
• Investors in California benefit from Prop 13’s value cap
  
• Texas taxes can rise quickly in booming markets—watch annual reassessments
  
• Choose based on your strategy: long-term hold (CA) vs. cash-flow now (TX)
  

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