Part Two -Taxes in Texas

What impact does Texas’s no state income tax really have on the cost of living  especially if you’re buying a waterfront home in East Texas?
The short answer: you’ll keep more of your paycheck, but you’ll likely pay more in property taxes especially if that home is sitting on the lake.

💰 No State Income Tax = More Take-Home Pay

Texas is one of just nine states that doesn’t collect state income tax. That means:

• ✅ You don’t lose a percentage of your paycheck to the state
• ✅ High earners can save thousands per year compared to other states
• ✅ Those savings can help offset other living costs like housing and taxes

This is one of the top reasons many buyers especially those relocating from higher tax states are drawn to places like Cedar Creek Lake and other East Texas lakefront communities.

🧾 But Property Taxes Fill the Gap

While Texas gives you a break on income tax, it makes up for it with property taxes. The average effective rate in Texas is around 1.6%, but in some lake areas, that number can rise to 2% or more depending on:

• Your county
• Local school districts
• Any MUDs or utility districts

And if you’re buying waterfront? Expect the assessed value to be higher than similar inland properties which pushes your total tax bill up.

Here’s a simple illustration:

• 🏡 Inland home: $300,000 × 1.6% = $4,800/year
• 🌊 Waterfront home: $750,000 × 1.6% = $12,000/year

Same tax rate, very different tax bill and that’s before factoring in county-specific overlays.

⚖️ It’s a Trade-Off — But Often a Worthwhile One

If you’re coming from a state like California, New York, or Illinois, you may be used to paying 5 – 10% or more in state income taxes alone. In Texas, you can put that money toward:

• 🔑 A larger mortgage
• 🛶 A waterfront property you love
• 💸 Paying your property taxes in full without stress

Yes, the cost of living here includes higher real estate taxes. But for many people, especially those purchasing higher end or second homes, the trade off is more than fair.

📍 East Texas Waterfront Property Taxes: Know Before You Buy

Cedar Creek Lake, Lake Palestine, and Lake Richland Chambers are just a few areas where waterfront properties command higher values and therefore, higher tax bills. Counties like Henderson and Kaufman each have their own taxing structures, and your final tax amount will depend on:

• The property’s assessed value
• Local tax rates
• Any exemptions you qualify for (homestead, over-65, etc.)

Bottom line: your tax bill is local and if you’re buying waterfront, it’s likely going to be higher than an off water property.

But when you zoom out and consider your total financial picture, including income tax savings, many buyers still come out ahead.

✅ Final Thought: Consider the Whole Picture

Living in Texas and especially owning waterfront property comes with a unique mix of tax benefits and responsibilities. You may pay more in annual property taxes, but you’ll save considerably on income taxes. For many of my clients, that’s a trade off they’re happy to make.

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