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Profile 1: Freelancer

$100,000 net profit · Self-employed · Single filer · Standard deduction
01
Assumptions for this profile:
  • Sole proprietor or single-member LLC (Schedule C)
  • $100,000 net business profit (after business expenses)
  • Single filer, taking federal standard deduction ($15,000) and CA standard deduction ($5,202)
  • SE tax calculated on 92.35% of net profit: $92,350 × 15.3% = $14,130
  • Half of SE tax ($7,065) deducted from federal AGI per IRS rules
  • Federal QBI deduction: 23% of qualified income (OBBBA 2026 permanent rate). California does not conform to QBI — no deduction at state level.
  • Sales tax: 55% of gross income assumed spent on taxable goods/services
  • Property tax: state median home value × effective rate

Federal Tax Calculation (same for both states)

Step 1 — Self-Employment Tax
Net profit$100,000
× SE multiplier (92.35%)$92,350
SS portion: $92,350 × 12.4%$11,451
Medicare: $92,350 × 2.9%$2,678
Total SE tax$14,130
Step 2 — Federal Income Tax
Net profit$100,000
− ½ SE deduction−$7,065
= Federal AGI$92,935
− Standard deduction−$15,000
Taxable before QBI$77,935
− QBI deduction (23%)−$17,925
= Federal taxable income$60,010
10% on first $11,925$1,193
12% on $11,925–$48,475$4,386
22% on $48,475–$60,010$2,538
Federal income tax$8,117

Full Tax Stack: California vs Texas

Tax Component California 🌴 Texas ⭐ CA Premium
Federal income tax $8,117 $8,117 —
Federal is identical in both states. Not shown separately below.
Self-employment tax $14,130 $14,130 —
State income tax
CA: 9.3% bracket at top of range. TX: $0
 $4,812 $0 +$4,812
Sales tax (est.)
55% of $100K × state avg rate
 $4,868 $4,510 +$358
Property tax (est.)
CA: $795K × 0.71% · TX: $305K × 1.68%
 $5,645 $5,124 +$521
Total annual tax burden $37,572 $31,881 +$5,691
Effective rate (% of gross) 37.6% 31.9% +5.7 pts

California State Income Tax Calculation

CA Bracket Calculation
Federal AGI (no QBI in CA)$92,935
− CA standard deduction−$5,202
= CA taxable income$87,733
1% on $0–$10,412$104
2% on $10,412–$24,684$285
4% on $24,684–$38,959$571
6% on $38,959–$54,081$907
8% on $54,081–$68,350$1,142
9.3% on $68,350–$87,733$1,803
CA state income tax$4,812
TX State Income Tax
Texas has no state income tax$0
Texas Constitution, Art. VIII, §1
prohibits a personal income tax
without voter approval.
TX state income tax$0
📊 Freelancer Verdict
TX saves $5,691/year
That's $474/month, or 5.7% of gross income. Driven almost entirely by CA's $4,812 state income tax. CA does not conform to the federal QBI deduction, meaning the 23% QBI benefit you get federally doesn't apply at the state level.
💡 Key insight

The federal QBI deduction (23% under OBBBA) reduces your federal taxable income but has no effect on California state taxes. California has never conformed to Section 199A. This makes the effective CA income tax rate on freelance income higher than what many people expect when comparing bracket rates alone.

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Profile 2: S-Corp Owner

$150,000 net profit · 60% salary / 40% distributions · Single filer
02
Assumptions for this profile:
  • S-Corporation with $150,000 net profit
  • Reasonable salary: $90,000 (60%) — W-2 wages paid to owner
  • Employer FICA on $90K salary: $6,885 (deducted from S-Corp income)
  • S-Corp K-1 pass-through: $150,000 − $90,000 salary − $6,885 employer FICA = $53,115
  • Owner's personal income: $90,000 W-2 + $53,115 K-1 = $143,115
  • Employee FICA on $90K: $6,885 (SS: $5,580 + Medicare: $1,305)
  • Federal QBI: 23% of K-1 income ($53,115 × 23% = $12,216). CA does not conform — no QBI at state level.
  • Note: CA also charges an $800 annual franchise tax on S-Corps (not included in personal tax figures below)
FICA (Payroll Taxes — Same Both States)
Employee SS: $90K × 6.2%$5,580
Employee Medicare: $90K × 1.45%$1,305
Employer SS: $90K × 6.2%$5,580
Employer Medicare: $90K × 1.45%$1,305
Total FICA cost$13,770
Federal Income Tax
W-2 + K-1 income$143,115
− Standard deduction−$15,000
Taxable before QBI$128,115
− QBI deduction (23% of K-1)−$12,216
= Federal taxable income$115,899
10% on first $11,925$1,193
12% on $11,925–$48,475$4,386
22% on $48,475–$103,350$12,073
24% on $103,350–$115,899$3,012
Federal income tax$20,664

Full Tax Stack: California vs Texas

Tax Component California 🌴 Texas ⭐ CA Premium
Federal income tax $20,664 $20,664 —
FICA (employee + employer) $13,770 $13,770 —
State income tax
CA: on $143,115 total income (W-2 + K-1), no QBI
 $9,478 $0 +$9,478
Sales tax (est.)
55% of $150K × state avg rate
 $7,301 $6,765 +$536
Property tax (est.)
CA: $795K × 0.71% · TX: $305K × 1.68%
 $5,645 $5,124 +$521
Total annual tax burden $56,858 $46,323 +$10,535
Effective rate (% of gross) 37.9% 30.9% +7.0 pts
CA State Income Tax on $143,115
Total personal income$143,115
− CA standard deduction−$5,202
= CA taxable income$137,913
1% on $0–$10,412$104
2% on $10,412–$24,684$285
4% on $24,684–$38,959$571
6% on $38,959–$54,081$907
8% on $54,081–$68,350$1,142
9.3% on $68,350–$137,913$6,469
CA state income tax$9,478
TX + CA S-Corp Additional Cost
CA state income tax$9,478
CA S-Corp franchise tax (min)$800
Total CA-only S-Corp cost$10,278
TX franchise tax: $0 for most small businesses (no-tax threshold)
📊 S-Corp Owner Verdict
TX saves $10,535/year
That's $878/month. S-corp owners benefit most from the TX move because state income tax hits both the W-2 salary and the K-1 pass-through. CA also charges an $800 annual franchise tax on top — bringing the true CA-only cost to ~$10,278 per year (excluding the sales and property tax gap).
⚠️ California Franchise Tax

California levies an $800 minimum franchise tax on every S-Corp, LLC, and C-Corp registered or doing business in the state — even if the entity has no income. This applies regardless of whether the owner files as a California resident. Remote business owners who are CA residents may still owe this tax on their entity. Texas has no comparable minimum entity tax for most small businesses (Texas franchise tax has a "no tax due" threshold).

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Profile 3: W-2 Employee

$100,000 salary · Standard deduction · Single filer
03
Assumptions for this profile:
  • W-2 employee with $100,000 gross salary
  • Standard deduction only (no itemizing)
  • Employee FICA withheld: SS $6,200 + Medicare $1,450 = $7,650 total (employer pays matching $7,650 separately)
  • No QBI deduction (only available on business income, not W-2 wages)
  • No pre-tax retirement contributions assumed in this baseline
  • Sales tax: 55% of gross income assumed spent on taxable goods/services
FICA (Employee Portion)
Social Security: $100K × 6.2%$6,200
Medicare: $100K × 1.45%$1,450
Employee FICA$7,650
Federal Income Tax
W-2 salary$100,000
− Standard deduction−$15,000
= Federal taxable income$85,000
10% on first $11,925$1,193
12% on $11,925–$48,475$4,386
22% on $48,475–$85,000$8,036
Federal income tax$13,615

Full Tax Stack: California vs Texas

Tax Component California 🌴 Texas ⭐ CA Premium
Federal income tax $13,615 $13,615 —
Employee FICA $7,650 $7,650 —
State income tax
CA: 9.3% bracket at $94,798 taxable. TX: $0
 $5,469 $0 +$5,469
Sales tax (est.)
55% of $100K × state avg rate
 $4,868 $4,510 +$358
Property tax (est.)
CA: $795K × 0.71% · TX: $305K × 1.68%
 $5,645 $5,124 +$521
Total annual tax burden $37,247 $30,899 +$6,348
Effective rate (% of gross) 37.2% 30.9% +6.3 pts
CA State Income Tax on $100K W-2
W-2 salary$100,000
− CA standard deduction−$5,202
= CA taxable income$94,798
1% on $0–$10,412$104
2% on $10,412–$24,684$285
4% on $24,684–$38,959$571
6% on $38,959–$54,081$907
8% on $54,081–$68,350$1,142
9.3% on $68,350–$94,798$2,460
CA state income tax$5,469
TX State Income Tax
Texas has no state income tax$0
TX state income tax$0
📊 W-2 Employee Verdict
TX saves $6,348/year
That's $529/month. W-2 employees get slightly more savings than freelancers at the same income because there's no QBI deduction to offset the federal rate (CA vs federal rate differential is larger). The CA savings on income tax alone is $5,469/year.
💡 W-2 workers: Remote work complication

If you're a remote W-2 employee working for a California-based company from Texas, you may still owe California income tax depending on whether the work is "sourced" to California. California aggressively asserts tax jurisdiction on employees of CA companies. Consult a tax professional before assuming a move to Texas eliminates CA income tax obligations on W-2 income.

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Profile 4: Retiree

$60,000 income · $35K pension + $25K Social Security · Single filer
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Assumptions for this profile:
  • $35,000 pension / annuity income
  • $25,000 Social Security benefits
  • Single filer, standard deduction
  • Federal SS taxability: combined income ($35K + ½ × $25K = $47,500) exceeds $34K threshold → 85% of SS is federally taxable ($21,250)
  • Federal AGI: $35,000 pension + $21,250 taxable SS = $56,250
  • California exempts 100% of Social Security benefits — only pension income is taxed at state level
  • No FICA on retirement income (no wages, no SE income)
  • Sales tax: 65% of gross income (retirees spend higher proportion of income)
Federal Income Tax
Pension income$35,000
Taxable SS (85% of $25K)$21,250
= Federal AGI$56,250
− Standard deduction−$15,000
= Taxable income$41,250
10% on first $11,925$1,193
12% on $11,925–$41,250$3,519
Federal income tax$4,712
CA State Income Tax
Pension income (taxable in CA)$35,000
Social Security (CA exempts SS)$0
= CA AGI$35,000
− CA standard deduction−$5,202
= CA taxable income$29,798
1% on $0–$10,412$104
2% on $10,412–$24,684$285
4% on $24,684–$29,798$205
CA state income tax$594

Full Tax Stack: California vs Texas

Tax Component California 🌴 Texas ⭐ CA Premium
Federal income tax $4,712 $4,712 —
FICA / SE tax $0 $0 —
State income tax
CA taxes pension only (not SS). TX: $0
 $594 $0 +$594
Sales tax (est.)
65% of $60K × state avg rate
 $3,452 $3,198 +$254
Property tax (est.)
CA: $795K × 0.71% · TX: $305K × 1.68%
 $5,645 $5,124 +$521
Total annual tax burden $14,403 $13,034 +$1,369
Effective rate (% of gross) 24.0% 21.7% +2.3 pts
📊 Retiree Verdict
TX saves $1,369/year
That's just $114/month — by far the smallest difference across all four profiles. California's SS exemption dramatically reduces the state income tax burden at this income level. Pension income at $29,798 taxable only generates $594 in CA income tax. The tax argument for moving is weak for most retirees at $60K income.
⚠️ Retiree surprise: California exempts Social Security

Many people assume California taxes everything. It doesn't. California fully exempts Social Security income from state income tax — a significant benefit at $25K in SS benefits that would otherwise push the CA state tax bill much higher. This is why the retiree profile shows the smallest CA-TX gap of all four profiles.

The Bottom Line

Summary: Annual Tax Savings Moving from CA to TX

Profile CA Total Tax TX Total Tax CA Eff. Rate TX Eff. Rate Annual Savings Monthly Savings
💻 Freelancer $100K net profit · Single $37,572 $31,881 37.6% 31.9% $5,691 $474/mo
🏢 S-Corp Owner $150K net profit · 60/40 split · Single $56,858 $46,323 37.9% 30.9% $10,535 $878/mo
👔 W-2 Employee $100K salary · Single $37,247 $30,899 37.2% 30.9% $6,348 $529/mo
🌅 Retiree $60K income · Pension + SS · Single $14,403 $13,034 24.0% 21.7% $1,369 $114/mo

4 Things That Surprise People

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Texas property taxes nearly match California's — in dollar terms

TX rate is 2.4× higher (1.68% vs 0.71%), but median TX homes ($305K) cost 62% less than CA ($795K). Net result: CA homeowners pay just ~$520/year more in property taxes at median values. Buy a $700K home in Texas and your property tax bill exceeds what you'd pay in California.

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Federal taxes dominate — and they're identical

For a freelancer at $100K, federal taxes ($22,247) are 4× larger than CA state income tax ($4,812). Moving to Texas doesn't change your federal bill. The headline "TX saves you $X" is entirely state-level — about 15% of total tax burden for most earners.

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Retirees save the least — because CA exempts Social Security

California doesn't tax Social Security benefits. A retiree with $25K in SS and $35K in pension pays CA state income tax only on the pension portion. At $29,798 taxable, the CA bill is just $594/year — making the move-to-Texas tax argument weak at this income level.

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The QBI deduction doesn't exist in California

The federal 23% QBI deduction (permanently extended by OBBBA 2026) is worth $17,925 in federal tax savings for a $100K freelancer. California has never adopted QBI — so that same income is taxed in full at the state level. This makes the CA income tax rate on business income feel higher than the bracket suggests.

Run your exact numbers

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State Tax Stack
Compare any 2 states with your income, entity type, and situation
🧮
SE Tax Calculator
Self-employment tax + QBI deduction + quarterly estimates
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S-Corp Election Tool
Model the exact S-Corp savings for your income and salary split
⚖️
Entity Comparison
LLC vs S-Corp vs C-Corp across all 50 states
🗽
NY vs FL — Coming Soon
NYC surcharge vs Florida zero income tax, same 4 profiles
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TX vs FL vs TN — Coming Soon
Three no-income-tax states compared across property, sales, and total burden

📂 Data Sources & Methodology