Thinking about buying a home in Texas or California? The mortgage is only part of the story. Property taxes and hidden costs of ownership will shape your monthly budget more than you expect. If you are a first-time buyer, understanding these differences is the key to making a smart move.
Property Taxes: The Basics You Need to Track
Property taxes vary widely across states and cities. What you pay depends not only on the rate but also on the value of the home.
- National average rate: 1.395% (effective rate, 2019 data)
- Highest large-city rates: Aurora, IL (3.30%), Bridgeport, CT (3.21%), Newark, NJ (3.02%), Detroit, MI (2.93%)
- Lowest large-city rates: Honolulu, HI (0.31%), Boston, MA (0.49%), Charleston, SC (0.52%), Denver, CO (0.56%)
Why the big spread?
- Cities that rely more on property taxes usually set higher rates.
- Cities with lower property values often raise rates to meet revenue needs.
- Higher government spending drives higher tax rates.
- In some places, businesses and apartments pay more, so homeowners pay less.
The rate is only half the picture. New York City and Wichita, KS, both had rates around 1.18%. But with higher home values in NYC, the tax bill was several times bigger.
Takeaway for you: Always check both the tax rate and the median home price in the city you are buying. A low rate does not always mean a low bill.
The Real Cost of Owning a Home
Your mortgage will not be the only bill. First-time buyers are often caught off guard by ongoing expenses.
Average annual hidden costs of homeownership in 2025: $21,000+.
Breakdown:
- Maintenance and repairs: $8,808 (about 2% of the home price)
- Utilities and energy: $4,494
- Property taxes: $4,316
- Homeowners insurance: $2,267
- Internet/cable: $1,515
- HOA fees: $2,913
Some states are far above average.
- Hawaii: $34,573
- California: $32,262
- New Jersey: $29,751
Takeaway for you: When planning your budget, add at least $20,000 per year in ongoing ownership costs. In high-cost states, plan for more.
Tax Rules That Favor or Hurt Buyers
How long you own the home and its value affect your tax bill.
- Homestead exemptions: A fixed dollar cut from the assessed value. These help lower-value homes more. For example, a $20,000 exemption is 20% off a $100,000 home, but only 5% off a $400,000 home.
- Assessment limits: In states like California, property assessments grow slowly while you own the home. But when you buy, the assessed value resets to market price. That means you pay far more than your neighbor in the same house if they bought 20 years ago.
- Classification: In many cities, businesses and apartments pay higher tax rates. This subsidizes homeowners and reduces your rate.
Takeaway for you: If you buy in a state with assessment limits, expect higher taxes at first, but stable growth over time. If you plan to move often, this benefit is smaller.
Texas vs California: Side-by-Side
Here’s how the two states stack up for home buyers:
| Feature | Texas (TX) | California (CA) |
|---|---|---|
| State income tax | None | 1% to 13.3% |
| Effective property tax rate | 1.67% (median) | 0.71% (avg), 1.21% (median) |
| Median home value | $260,400 | $695,400 |
| Reliance on property tax | High | Lower (offset by income tax) |
| Assessment rules | Annual reassessment, 10% cap on value increase | Prop 13: 2% annual cap, reset at sale |
| Homestead exemption | $140,000 | $7,000 |
| Total state and local tax burden (median household) | 12.73% | 8.97% |
What This Means for You
1. In Texas
- Lower home prices mean you enter the market with less cash.
- But property taxes are higher and can rise quickly with annual reassessments.
- The $140,000 homestead exemption helps, but the system still leans heavily on property tax revenue.
2. In California
- Home prices are much higher. Your upfront cost is steep.
- Proposition 13 makes long-term ownership predictable. Annual increases are capped.
New buyers face a reset tax bill based on today’s high home values.
Overall tax load
- Texas has no income tax, but higher property and sales taxes push your total burden up.
- California has income tax, but your total state and local taxes may be lower unless you are a high earner.
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Final Thought
When you compare Texas and California, the question is not only about the sticker price of the home. You need to ask yourself:
- How long will you own the home?
- Do you prefer predictable taxes or lower entry prices?
- Do you expect your income to rise into higher brackets?
For first-time buyers, property taxes are not background noise. They are part of your monthly budget and your long-term financial plan.
The smart move is to run the numbers for both your mortgage and your ongoing ownership costs. Then decide which state’s system fits your income, your timeline, and your tolerance for rising costs.
FAQ:
1. Do property taxes ever go down?
Yes, if property values drop in your county or if your city reduces the tax rate. But in most cases, values and bills trend upward.
2. Is Texas cheaper overall since there is no state income tax?
Not always. Texas offsets this by collecting more through property and sales taxes. For a median-income household, the total tax load can be higher in Texas than in California.
3. Why do California buyers complain about property taxes if rates are lower?
Because home values are much higher, the dollar amount of the tax bill is still steep. Also, new buyers face a reset in assessed value, so their bills can feel unfair compared to long-term neighbors.
4. How much should I budget for hidden costs?
At least $20,000 a year nationwide. More in California and Hawaii. Property taxes are one part of this, but maintenance is usually the biggest expense.
5. What is the best way to lower property taxes as a buyer?
- Apply for homestead exemptions if available.
- File appeals if you believe your assessment is too high.
- Choose a city with lower effective rates and moderate home values.
6. If I plan to move in 5 years, which state makes more sense?
Texas may make more sense if you want lower entry prices and do not plan to stay long-term. California’s Proposition 13 benefits show up more clearly for long-term owners who hold the same home for decades.