What Is The Cost Of Living In Tennessee Vs. Texas?

Texas has long been the top destination for those looking to transplant themselves to a new state. Though, in 2019 it was dethroned by Florida and again in 2020 but, this time, by Tennessee. While Tennessee and Texas have some shared DNA, as many of Texas’ early heroes actually came from Tennessee, folks are attracted to the abounding beauty, lively atmosphere, charm, and culture of Tennessee.

Still, with its cultural diversity, lack of state income tax, plentiful job opportunities, and central location, Texas has much to offer residents as well. But, how do these two states stack up when it comes to cost of living?

The cost of living index in Tennessee is just 87.6, meaning it is about 12% more affordable to live in Tennessee than the national average (100). Texas, on the other hand, has a cost of living index of 93.9, so it is less expensive than the national average but more expensive than Tennessee. The median price of a home in Tennessee is $231,600, which is about 26% lower than the national average of $291,700. Meanwhile, the median home price in Texas is $243,600 – under the national average and only about 5% more expensive than Tennessee.

Aside from median housing prices, let’s explore how the cost of living compares in Tennessee vs. Texas.

When you consider the fact that the median home price in the state of Tennessee is $231,600, it is slightly cheaper to purchase a home here than in Texas. With Texas’ median home price of $243,600, you’d end up paying about 5% more a home in Texas than Tennessee.

The housing market in Tennessee is currently on fire, as homes are selling quickly and, in most cases, for more than the asking price. Like much of the U.S., buyers are outpacing the available homes in Tennessee. This was a direct result of the COVID-19 pandemic and a major consistent influx of people to the state. There are simply too many buyers than there are homes, which has created a classic case of supply and demand imbalance.

Nashville’s median home value rose by roughly 16% in the last year, but home prices are rising all across the state. It’s predicted that homes could continue to rise steadily into 2022. Local housing markets have accelerated because of a strong demand among buyers, but the homes for sale took a steep decline during 2020 and 2021.

A very similar situation is taking place in Texas, as home values have increased by about 8.5 percent over the last year. This was caused by the limited inventory, with homes receiving several offers and most selling above the asking price. While it may be an excellent time to be a seller in both Tennessee and Texas, competition is steep and prices are not ideal for buyers. Regardless, it still remains more affordable to purchase a home in Tennessee than Texas.

Lower housing costs overall are a benefit of living in Tennessee over Texas. However, prices vary based on where you live in either state. For instance, while the majority of Tennessee has median home prices below the national average, the median home price in Nashville is above the national average, at $341,700. Austin, Texas also has a median home price above the national average, but most other cities are below.

Although there may be cities in both Texas and Tennessee with home prices that are more expensive than other states in the U.S., housing costs are still around 15 to 20 percent cheaper in Tennessee than Texas.

There are approximately twenty-one total states in the U.S. that have average monthly rental rates below $1,000. With a statewide average rent of just $869 per month, Tennessee is considered an affordable place to live for renters. Generally speaking, states that have the lowest rental prices also have some of the lowest costs of living, and this is certainly the case for Tennessee.

With that said, the table below provides a more comprehensive look at the average monthly rent in some of the major cities in Tennessee:

During 2019 and 2020, average rent prices per month dropped in 12 U.S. states, with Texas included. At $1,045, average monthly rental rates in Texas cities are typically below the national average. Though, like Tennessee, the actual rent you’ll pay varies based on where you live in Texas. For instance, Flower Mound, Texas has the most expensive rental prices in the state at $1,685, while the city of Brownsville is the cheapest place to rent in Texas, at just $730 per month.

The following table displays a more detailed look at the average rent in some of Texas’ major cities:

Although Tennessee does not have a state income tax on salaries, wages, bonuses or any other form of work income, the state did collect the “Hall Income Tax.” This was named after the Tennessee state senator who sponsored the legislation back in 1929. It only applied to earnings from investment and interest dividends and for 2020 it was a 1% tax. Though, as of tax year 2021, the Hall Income Tax is eliminated. Moving forward, Tennessee will not have a state income tax.

Texas is also one of the few states in the nation that does not levy a state income tax of any kind. This means that whether you’re a lawyer, real estate agent, doctor, or dog-walker, you are not required to pay a state income tax on your earnings in Texas. You do, however, still have to fil a federal income tax return and pay federal income taxes each year.

Tennessee’s statewide base sales tax is 7%, which on its own is tied for the second-highest rate in the country. Though, cities and counties across the state can collect extra sales taxes that range from 1.50% to 2.75%. This means that the highest sales tax that you could pay in Tennessee is 9.75%, which happens to be the total sales tax rate in Nashville, TN.

Texas, on the other hand, has a relatively modest statewide sales tax rate – at just 6.25%. Though, when you consider additional city and county taxes, 8.25% is the highest sales tax rate you could end up paying in Texas. In fact, rates in most of Texas’ major cities – such as Houston, Dallas, and San Antonio – do hit this limit.

One of the major financial advantages of living in Tennessee is the fact that homeowners in the state pay some of the lowest property taxes in the U.S. The median statewide property tax paid is $1,220, which translates to an average effective property tax rate of 0.64%. While this is the 15th-lowest effective rate in the country, rates vary quite a bit based on where you live in the state. For example, Shelby County has a high rate of 1.42%, while Pickett County has the lowest at under 0.37%.

Dissimilarly, Texas’ property taxes are among the highest in the country. The average effective property tax rate is a staggering 1.69%, meaning Texas homeowners only pay 1.69% percent of their home’s market value in taxes each year. This equates to a statewide average of $3,390 in annual property taxes for Texans.