Bank Gap by State

The Bank Gap in Texas

Texas has no state income tax, funding government instead through comparatively high property and sales taxes, which removes the tax angle from the Bank Gap decision but doesn't mean living costs are uniformly low across the state.

Big-bank average0.38%

Best available4.40%

$1,005/yrlost on a $25k balance · 4.02 pp spread

Last reviewed August 7, 2026 · SwitchWize Research Desk

Best savings APY

4.40%

high-yield

National average

0.38%

big-bank avg

APY gap

4.02 pp

spread

TX tax on interest

None

no income tax

No state tax — full gap is yours

$1,005/yr

on a $25,000 balance

On a $25,000 balance, the gap is about $1,005 a year. Texas has no state income tax, so you keep the full amount.

Estimated Bank Gap by balance

Estimated annual Bank Gap by balance at 0.38% current APY versus 4.40% better-fit APY
Balance	Current earnings	Better-fit earnings	Estimated Bank Gap
$5,000	$19	$220	$201
$10,000	$38	$440	$402
$25,000	$95	$1,100	$1,005
$50,000	$190	$2,200	$2,010
$100,000	$380	$4,400	$4,020

Estimates over 12 months at 0.38% current APY and 4.40% better-fit APY. Example only — your result depends on your balance, rates, and time horizon.

Why Texas changes the math

Texas levies no state income tax, so savings interest is taxed only at the federal level. That removes the state-tax advantage that makes Treasuries attractive elsewhere — in Texas the simplest, highest-value move is the top-yielding FDIC-insured savings account.

Living costs vary widely across Texas, from below the national average in much of the state to some of the fastest cost growth in the country in Austin, which meaningfully changes typical emergency-fund sizing by metro.

Cost of living in Texas is near the national average, though rising fast in Austin, which shapes how large an emergency fund needs to be and therefore how many dollars the Bank Gap quietly costs on idle cash.

After-tax tip

Because Texas has no state income tax, the Treasury state-tax advantage does not apply. The simplest high-value move is to put liquid cash in the highest-yielding FDIC-insured savings account.

Open the short-term savings tool

Frequently asked questions

Does Texas tax high-yield savings account interest?

No. Texas has no state income tax, so savings account interest is taxed only at the federal level. There is no state tax drag on the extra interest you earn by switching to a better account.

Is a high-yield savings account worth it in Texas?

Yes. With no state income tax, the after-tax case is simple: moving cash from a national-average account to a top high-yield savings account keeps more in your pocket, and there is no state-tax wrinkle to weigh.

Are T-Bills better than a HYSA for Texas savers?

Usually not on tax grounds. The main edge T-Bills have elsewhere is exemption from state income tax, and Texas has none. For most Texas savers the highest-yielding FDIC-insured savings account is the cleaner choice for liquid cash.

Your personal Bank Gap

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Educational information, not tax or financial advice. State tax rules are summarized at a high level and depend on your full situation. Rates are illustrative of current market conditions and should be confirmed with the provider. Confirm tax treatment with a qualified professional.