Best Places to Retire in Texas: Low Taxes & Low Cost

Texas ranks among the top retirement destinations because it levies zero state income tax on any income source, including Social Security benefits, pension distributions, IRA withdrawals, and investment income. You keep every dollar of your retirement income that the federal government allows.

Beyond taxes, Texas delivers relatively low property taxes on homestead properties (the state grants homeowners 65 and older an additional $10,000 homestead exemption, plus school districts may offer further reductions or freezes), affordable housing in many mid-sized cities, and a cost of living that runs 8-10% below the national average in non-urban areas. The climate ranges from humid subtropical in the east to semi-arid in the west, so retirees can choose snow-free winters or milder hill-country summers.

Temple (population ~82,000) in Central Texas anchors the Temple-Belton metro area. Median home prices sit near $230,000, and the city hosts the Texas A&M Health Science Center and Baylor Scott & White Medical Center, ensuring excellent healthcare access.

College Station (population ~120,000), home to Texas A&M University, combines small-town feel with big-university amenities – concerts, lectures, sports, and museums. Median home prices range from $270,000 to $300,000.

Georgetown (population ~75,000), 30 miles north of Austin, consistently ranks in national "best places to retire" lists. Median home prices have climbed to $380,000-$420,000 due to demand, but the city offers Baylor Scott & White and St.

San Antonio (population ~1.5 million) itself provides the most healthcare options in South Texas: the South Texas Medical Center, UT Health San Antonio, and numerous VA facilities. Neighborhoods like Alamo Heights, Stone Oak, and the Northwest Side offer walkable amenities, lower crime, and home prices from $300,000 to $500,000.

Texas funds schools and local services primarily through property taxes, which average 1.6-2.0% of assessed value statewide but can reach 2.5-3.0% in high-growth suburbs. A $300,000 home might carry an annual tax bill of $6,000 to $7,500 before exemptions.

• An additional $10,000 homestead exemption (beyond the standard $100,000 school-tax exemption) reduces your taxable value.
• School district taxes freeze at the amount owed in the year you turn 65 or qualify for the over-65 exemption; they never rise as long as you own and occupy the home.
• Many counties and cities offer optional over-65 or disability exemptions and freezes; check with your county appraisal district (for example, Travis County offers an additional $25,000 exemption for over-65 homeowners).
• Surviving spouses can transfer the freeze from a deceased spouse's home to a new home.

These provisions significantly cut the long-term tax burden for retirees who stay put. If you move between Texas cities, you lose the freeze and reset at the new home's tax rate, so location matters.

Gulf Coast cities like Rockport, Port Aransas, and Galveston face hurricane risk (Hurricane Harvey in 2017 devastated Rockport), high humidity May through September, and mandatory windstorm and flood insurance. Homeowners insurance premiums can run $2,000-$4,000 annually, double or triple the state average.

West Texas (El Paso, Midland, Abilene) offers dry air, low humidity, and 300+ sunny days per year, but summer highs exceed 100°F and cultural amenities are sparse. El Paso (population ~680,000) is the exception, with a robust healthcare system, a binational culture, and median home prices around $220,000, but it sits 600+ miles from Houston and Dallas.

Texas does not tax capital gains, dividends, or interest, so investment income also escapes state taxation. This makes Texas particularly attractive for retirees with brokerage accounts or rental income.

However, factor in property taxes (higher than many states), homeowners insurance (Texas ranks among the top five states for insurance costs, averaging $2,000-$3,000 annually), and summer cooling bills (July-August electric bills can hit $250-$400 in a 2,000-square-foot home). Run the full budget – housing, utilities, insurance, property tax – before assuming Texas will be cheaper.

Check property tax rates and exemptions through the county appraisal district website, and request a homeowners insurance quote from a local agent (rates vary wildly by ZIP code and proximity to the coast). Tour senior centers and ask about programs – many Texas cities offer pickleball leagues, art classes, fitness programs, and volunteer opportunities specifically for residents 55+.

If you have significant assets or complex tax situations, consult a Texas-based CPA or fee-only financial planner before relocating. Texas has no state income tax, but you will still file federal returns, and your state of origin may try to claim residency if you split time (snowbirds, take note).

What is the cheapest city to retire in Texas?

Does Texas tax Social Security or retirement account withdrawals?

No. Texas levies zero state income tax on Social Security benefits, pension income, IRA distributions, 401(k) withdrawals, capital gains, dividends, or any other income source.

How much are property taxes for retirees in Texas?

Property taxes average 1.6-2.5% of assessed value, but homeowners 65 and older receive an additional $10,000 exemption and a freeze on school district taxes, significantly reducing the annual increase. A $300,000 home might cost $5,000-$7,000 per year after exemptions, depending on the county.

Which Texas city has the best healthcare for seniors?

Is it better to retire on the Texas coast or in the Hill Country?

The Gulf Coast (Rockport, Port Aransas) offers winter warmth and waterfront living but faces hurricane risk and high insurance costs. The Hill Country (Fredericksburg, Kerrville) provides mild four-season weather, lower humidity, and no hurricane risk, but fewer water activities.

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