California Proposition 13 vs. Texas (Long-Term Hold)

[Jefferson Kim]

Has anyone done an analysis on long-term hold commercial properties on California vs. Texas?

I used to think Texas was a "no-brainer" because of not having State Income Tax, but upon further analysis, the fact that California's Proposition 13 allows property tax appreciation at  a maximum of 2% per annum with property taxes ranging in the 1% range, ends up weighing heavily in favor over Texas (even after paying California State Income Tax).

I'm seeing break even after 4 years based on certain assumptions. Even if my initial assumptions are off, my analysis seems to place a heavy case that the California State Income Tax pales in comparison to the savings I receive in Proposition 13 over a 10 year horizon.

Is there anyone else coming to that conclusion or have done an analysis which counters my findings?

[Matt Mason]

Keep in mind you will pay the income tax in your state of residence no matter where the property is located.  You would just get a credit for any income taxes paid to another state on your own state return.  Basically, you would pay the Texas Property Tax and CA Income Tax if you held Texas property as a CA resident, which is pretty much the worst of both worlds.