Over the last decade, Texas — and Dallas specifically — has become one of the most common landing points for high-earning executives, business owners, and wealthy families relocating from higher-tax states. The pattern is well documented. California, New York, Illinois, and New Jersey continue to lose high-income residents to Texas and Florida, and the residents who move tend to fall into recognizable patterns: founders following a recent liquidity event, executives at companies relocating operations, retirees looking to anchor wealth in a more favorable jurisdiction, and professionals whose work has become geographically flexible.

The tax math is the most-cited reason, and it deserves examination because the math is real but the structure that supports it is more complex than the marketing materials suggest.

The state income tax dimension

Texas has no state income tax. For 2026, California's top marginal rate is 13.3% (including the 1% Mental Health Services surcharge on income above $1 million). New York State's top rate is 10.9%, and New York City residents pay additional city income tax on top of that. New Jersey's top rate is 10.75%.

For a household with $5 million of annual ordinary income — not unusual at the executive level — moving from California to Texas saves roughly $665,000 per year in state income tax alone, assuming income taxed at the top marginal rate. Over a decade, that approaches $6.65 million of preserved income before any other consideration. The number is large enough to drive the decision on its own.

For households whose income comes substantially from capital gains rather than ordinary income, the math differs but the direction is the same. California taxes long-term capital gains at the same rates as ordinary income (up to 13.3%), while the top federal long-term capital gains rate is 20%, plus the 3.8% Net Investment Income Tax, for a federal maximum of 23.8%. A Texas resident pays only the federal rate with no state add-on. On a $20 million capital gain, avoiding California's state tax preserves roughly $2.66 million.

The property tax counterweight

Texas pays for the absence of income tax partly through higher property taxes. Texas property tax rates vary by jurisdiction but typically range from roughly 1.8% to 2.5% of assessed value annually, with Dallas County's effective rate around 2.1%.

For a $10 million residence, that works out to roughly $210,000 per year in property tax. By comparison, California's Proposition 13 caps property tax near 1% of purchase price (plus local assessments, typically bringing the effective rate to about 1.1–1.25%) on an inflation-limited basis. A $10 million California residence acquired today would carry property taxes of roughly $110,000 to $125,000 annually.

The annual property tax differential — on the order of $85,000 to $100,000 per year in California's favor in this example — is significant. It does not, however, come close to offsetting the income tax savings for high-income households. The break-even point at which California's property tax advantage equals Texas's income tax advantage occurs only at very specific income and asset profiles. For most households considering the move, the income tax differential dominates decisively.

The estate tax dimension

Texas has no state estate tax or inheritance tax. Several of the states that high-income earners are leaving do. New York, in particular, maintains a state estate tax with a 2026 exemption of approximately $7.35 million per person and a notorious "cliff" provision: once an estate exceeds the exemption by more than 5%, the entire estate — not just the amount above the exemption — becomes taxable, at rates ranging up to 16%.

By contrast, the federal estate tax exemption rose to $15 million per person ($30 million for a married couple) for 2026 under the 2025 tax legislation. The result is a large gap between the federal exemption and the lower state-level exemptions in places like New York. A household whose estate sits comfortably under the federal threshold can still face a substantial state estate tax bill in New York — and zero in Texas. For older relocators or families focused on generational wealth transfer, this is a meaningful consideration.

Establishing Texas residency — the part most people get wrong

The states being left behind do not surrender high-income residents quietly. California, New York, and Massachusetts in particular maintain aggressive residency audit programs, and the burden of proof in a residency dispute typically falls on the taxpayer. Establishing Texas residency for tax purposes requires more than buying a house and updating a driver's license.

The factors that state tax authorities examine in residency disputes include:

Establishing Texas residency cleanly typically requires moving the bulk of these factors to Texas in a way that demonstrates genuine intent, not just convenience. Buying a Texas residence while maintaining a substantial presence and life in the higher-tax state is the pattern most likely to fail an audit. The households that successfully establish Texas residency are typically those who genuinely relocate, sell or substantially reduce ties to the prior state, and document their physical presence carefully.

The income tax differential dominates decisively. But residency is established by intent and documentation, not by a deed alone.

Other Texas considerations

Beyond the tax math, several factors matter to high-income relocators evaluating Dallas specifically:

Where Preston Hollow fits

For relocating executives at the highest income tiers, Preston Hollow is the most common landing zone in Dallas. The combination of established prestige, proximity to private schools, the country club network (Dallas Country Club, Brook Hollow, Preston Trail, Northwood, and Bent Tree are all within about fifteen minutes), and the architectural and lot quality at the high end make the neighborhood the closest Dallas equivalent to Atherton, the Upper East Side, or the North Shore of Chicago.

Buyers relocating to Dallas at the $10 million-plus range typically focus on Old Preston Hollow (Strait Lane and the adjacent streets), University Park, and Highland Park. Within Old Preston Hollow, current inventory at the highest end is constrained, with relatively few recent-construction homes available at any given time.

5214 Royal Lane — a 2017 Lloyd Lumpkins and Sharif & Munir custom build in Old Preston Hollow, two blocks from Strait Lane — is one example of the contemporary inventory currently available. The property is a multi-generational compound on nearly two acres, listed at $10,995,000 by Hawkins Group at Douglas Elliman, with seller financing available for qualified buyers.