Texas is known for its affordable cost of living compared to many other states. But is a $200,000 annual salary enough to live comfortably in the Lone Star State? Let's take a closer look at what kind of lifestyle a 200K income can provide in Texas.

Putting 200K in Perspective

According to the U.S. Census Bureau, the median household income in Texas was $63,826 in 2021

This means that a 200K salary is over three times the median income in the state. In fact, a 200K income puts you in the top 5% of earners in Texas

However, it's important to note that the cost of living can vary significantly depending on where you live in Texas. Cities like Austin, Dallas, and Houston tend to have higher living costs than smaller towns and rural areas. Cleaning services Austin⁠ can help keep your home spotless.

Taxes on a 200K Salary in Texas

One advantage of living in Texas is that there is no state income tax

This means you get to keep more of your paycheck compared to states with high income taxes like California or New York.

However, you will still owe federal income taxes. According to the Forbes tax calculator, if you make $200,000 per year in Texas, you will owe around $42,000 in federal income taxes, assuming standard deductions

This leaves you with a take-home pay of around $158,000.

Housing Costs on a 200K Salary

Housing is likely to be your biggest expense, especially if you live in a major city. According to Zillow, the typical home value in Texas is $315,000 as of early 2023.

With a 200K salary, you could comfortably afford a $600,000 to $800,000 home, assuming you put 20% down and have a good credit score

This would allow you to buy a very nice house in most parts of Texas.

If you prefer to rent, you could easily afford an upscale apartment or rental home on a 200K salary. Expect to pay $2,000 to $4,000 per month in rent for a nice place in cities like Dallas, Houston, or Austin. Speaking of Austin, if you need an ⁠Austin cleaning service⁠, there are many great options.

Affording a Comfortable Lifestyle

After accounting for housing, taxes, and other necessities, a 200K salary leaves plenty of room for discretionary spending. You could easily afford to:

Dine at nice restaurants regularly
Take multiple vacations per year
Drive a luxury vehicle
Send your kids to private school
Donate generously to charity
Save a significant portion of your income

According to an analysis by SmartAsset, a single adult would need to make around $75,000 to live comfortably in Dallas

For a family of four with two working adults, a combined salary of around $181,000 is considered comfortable. With a 200K salary, you would be well above these thresholds.

Saving and Investing on 200K

One of the best things you can do with a high salary is to prioritize saving and investing. Even if you live an affluent lifestyle, aim to save at least 20% of your gross income for long-term financial goals.

For example, maxing out a 401(k) at $22,500 per year and an IRA at $6,500 per year in 2023 would allow you to save $29,000 for retirement in tax-advantaged accounts. You could easily save another $20,000+ per year in a taxable brokerage account.

If you consistently save and invest a large portion of your 200K salary, you could reach financial independence at a relatively young age. Saving diligently on a 200K income could allow you to retire in your 40s or 50s.

The Bottom Line

While $200,000 per year is not enough to afford a lavish lifestyle in the most expensive parts of the country, it is a very high salary for Texas. Earning 200K puts you in the top 5% of households and allows you to afford a very comfortable lifestyle in most Texas cities.

The lack of a state income tax and relatively affordable housing costs make a 200K salary stretch further in Texas than it would in high cost-of-living states. If you are disciplined about saving and investing a significant portion of your income, a 200K salary could even provide financial independence at a young age.

Of course, how comfortably you can live on 200K depends on your lifestyle and family size. But for most Texans, a $200,000 salary is more than enough to afford a very high quality of life. With smart financial choices, a 200K income in Texas can provide prosperity now and financial security for the future.

Is 200K a good salary in Texas?