Dallas has no city income tax, and Texas has no state income tax either. Nothing gets withheld from your paycheck for the city, there is no local return to file in April, and there is no state return either. What you still owe is federal income tax, and the money Dallas needs to run itself comes mostly out of property tax and sales tax instead.
Why Dallas Cannot Charge an Income Tax
The block is written into the Texas Constitution. Article VIII, Section 24-a prohibits the state from taxing the net incomes of individuals, including income from partnerships and unincorporated associations.1State of Texas. Texas Constitution Article VIII – Taxation and Revenue Texas cities get their taxing authority from the state, so that ceiling blocks Dallas and every other Texas municipality from inventing one of their own.
Voters tightened the ban in November 2019 by approving Proposition 4. Before Prop 4, the legislature could have opened the door to an income tax with a simple majority and a referendum. Now it would take a two-thirds supermajority in both the Texas House and Senate followed by statewide voter approval, which is the same bar as any other constitutional amendment.1State of Texas. Texas Constitution Article VIII – Taxation and Revenue
Property Tax Is Where the Bill Shows Up
With no income tax to lean on, Dallas funds police, fire, streets, parks, and general operations largely through property tax, along with sales tax.2City of Dallas. Financial Transparency Taxes Your annual property tax statement bundles levies from several taxing entities, not just the city.
For 2025, the rates per $100 of assessed value for a home inside the city limits and the Dallas Independent School District break down roughly like this:
- City of Dallas: $0.6988 per $100
- Dallas ISD: $0.9938 per $100
- Dallas County: $0.2155 per $100
Added up, that is about $1.91 per $100 of assessed value before any special district charges. On a $350,000 home, the raw bill lands near $6,685 a year. The Dallas Central Appraisal District sets your property’s market value each spring, and that number drives the calculation.3Dallas Central Appraisal District. Dallas Central Appraisal District
Homestead Exemptions
If you own and live in the home as your primary residence, Texas law requires school districts to exempt $140,000 of your appraised value from school property taxes. Homeowners who are 65 or older or disabled get an additional $60,000 school-district exemption on top of that.4Texas Comptroller of Public Accounts. Property Tax Exemptions Cities and counties may offer their own homestead exemptions as well, and amounts vary. Filing with the Dallas Central Appraisal District costs nothing and can take hundreds or thousands off your bill, so file as soon as you close.
Protesting Your Appraisal
Because the tax is tied directly to the appraised value, an inflated appraisal means an inflated bill. Texas lets you protest every year at no cost. The appraisal district mails a notice of appraised value in the spring, and you generally have until May 15 or 30 days after the notice date to file. Recent comparable sales from your neighborhood and photos of any property deficiencies make the strongest case. Many Dallas homeowners protest annually, and reductions are common.
Sales Tax in Dallas
The other major revenue source is sales tax. Texas charges 6.25% on most retail purchases, and local jurisdictions can add up to 2% on top, for a maximum combined rate of 8.25%.5Texas Comptroller of Public Accounts. Sales and Use Tax Dallas collects the full 2% local share, so the rate at checkout in the city is 8.25%.2City of Dallas. Financial Transparency Taxes Groceries, prescription medications, and certain other essentials are exempt, which softens the rate for everyday spending.
Federal Income Tax Still Applies
Living in a no-income-tax city and state does not change what you owe the IRS. Every Dallas resident who meets the federal filing thresholds has to report income on Form 1040.6Internal Revenue Service. Check if You Need to File a Tax Return Your employer withholds federal income tax, Social Security at 6.2%, and Medicare at 1.45% from each paycheck no matter where you live.
If you are self-employed or earn significant income without withholding, you make quarterly estimated payments directly to the IRS. For tax year 2026, the deadlines are:7Internal Revenue Service. 2026 Form 1040-ES
- First quarter: April 15, 2026
- Second quarter: June 15, 2026
- Third quarter: September 15, 2026
- Fourth quarter: January 15, 2027
You can skip the January 15 payment if you file your 2026 return and pay the full balance by February 1, 2027.7Internal Revenue Service. 2026 Form 1040-ES
Avoiding the Underpayment Penalty
The IRS charges a penalty if you owe $1,000 or more at filing time and did not pay enough during the year. You avoid it by meeting any one of these safe harbors:8Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty
- You paid at least 90% of your current-year tax liability.
- You paid at least 100% of last year’s tax. If your prior-year adjusted gross income was over $150,000 ($75,000 if married filing separately), the threshold rises to 110%.
- You owe less than $1,000 after subtracting withholding and credits.
This is where people moving to Dallas from California, New York, or another high-tax state sometimes slip up. In those states, large state withholdings quietly helped cover the overall tax picture. In Texas, all your withholding has to come from the federal side alone, and if you adjust your W-4 incorrectly after the move, you can end up short in April.
Remote Work for an Out-of-State Employer
The no-income-tax benefit has one real limit worth knowing about. If you work remotely from Dallas for an employer in a state with its own income tax, you generally owe tax based on where you physically do the work, which means most states will leave that income alone.
The exception is the “convenience of the employer” rule. Under it, if you telecommute for your own convenience rather than because your employer requires it, the employer’s state can tax your income as though you were sitting in their office. New York enforces this most aggressively, and Connecticut, Delaware, Nebraska, New Jersey, Oregon, and Pennsylvania apply some version of it. If your employer is in one of those states and you telecommute from Dallas by choice, you can get an unexpected tax bill. Written documentation from your employer that the arrangement is a business necessity, not a personal preference, helps.
Capital Gains for Dallas Investors
Investment income earned by Dallas residents is subject only to federal capital gains tax. Long-term gains on assets held more than a year are taxed at 0%, 15%, or 20% depending on your taxable income. For 2026, single filers pay 0% on long-term gains up to $49,450 of taxable income, 15% between $49,450 and $545,500, and 20% above that. For married couples filing jointly, the 15% bracket starts at $98,900 and the 20% bracket at $613,700. States with their own income tax typically pile an extra 5% to 13% on top of those federal rates. That layer does not exist in Texas, which makes Dallas a notably cheaper place to realize large gains.
If You Own a Business in Dallas
The no-income-tax rule is for individuals. Businesses have their own obligations.
Texas imposes a franchise tax on most entities doing business in the state, including corporations, LLCs, and partnerships. It is based on total revenue (margin), not net income. For the 2026 report year, the rate is 0.75% of taxable margin for most businesses and 0.375% for retailers and wholesalers. Businesses with total revenue of $2,650,000 or less owe no franchise tax, though they may still need to file a no-tax-due report.9Texas Comptroller of Public Accounts. Franchise Tax Sole proprietorships and most single-member LLCs owned by a natural person are generally exempt.
Freelancers, independent contractors, and sole proprietors in Dallas owe federal self-employment tax of 15.3% on net earnings, covering both halves of Social Security (12.4%) and Medicare (2.9%). An additional 0.9% Medicare surtax applies once self-employment income exceeds $200,000 for single filers or $250,000 for married couples filing jointly.10Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) That 15.3% catches new freelancers off guard, because employees only ever see the 7.65% employee half on their pay stubs.