Dallas does not have a state income tax, because Texas does not levy one anywhere in the state, and no Texas city is allowed to create a local version. That protection is written into the Texas Constitution. What Texas does collect is a 6.25% state sales tax (8.25% in Dallas once city and transit portions are added), property taxes that rank among the highest in the country, a motor vehicle sales tax, a franchise tax on most businesses, and a hotel occupancy tax. So the short answer is no on income tax, yes on nearly everything else.
No Income Tax at the State or Local Level
Your paycheck in Dallas shows federal income tax, Social Security, and Medicare. Nothing for the state. You don’t file a Texas return in April, and the city of Dallas has no authority to tax wages either.
This isn’t just current policy. Under Article 8, Section 24 of the Texas Constitution, the legislature could only create an income tax with voter approval in a statewide referendum.1Justia. Texas Constitution Article 8 Section 24 – Personal Income Tax; Dedication of Proceeds In 2019, voters passed Proposition 4, adding Section 24-a and flatly prohibiting any tax on individual net income. Undoing that ban would take a two-thirds vote in both legislative chambers followed by another statewide referendum.
What You Pay at the Register
Sales tax is where Texas recovers much of the revenue other states pull from paychecks. The state rate is 6.25% on most tangible goods and many services under Tax Code Chapter 151.2State of Texas. Texas Tax Code Chapter 151 – Limited Sales, Excise, and Use Tax Dallas adds 1% for the city and 1% for the transit authority, which puts the combined rate at 8.25%. That’s the maximum any Texas locality can charge, and most major cities in the state are at the same ceiling.
Several categories escape the tax. Unprepared grocery staples like bread, milk, eggs, fruit, and vegetables are exempt, and so are over-the-counter medicines carrying an FDA-required Drug Facts label.3Texas Comptroller of Public Accounts. Grocery and Convenience Stores Prepared food, restaurant meals, alcohol, soft drinks, and candy are all fully taxable. The line between “grocery” and “prepared” catches people off guard: a sandwich from the deli counter is taxed, the same sandwich pre-wrapped in the cooler case is not.
If you buy something out of state and the seller doesn’t collect Texas tax, you technically owe a use tax at the same rate. Few individuals report it, but the obligation exists, and it’s worth knowing before a large out-of-state purchase.
Property Taxes in Dallas
Property tax is the trade-off. Texas has the seventh-highest effective property tax rate in the country, averaging about 1.40% of assessed value, compared to a national median around 1%. Dallas homeowners feel this especially hard because several taxing entities stack their rates: the City of Dallas, Dallas County, Dallas ISD, Dallas College, and the hospital district each take a piece.
The Texas Constitution requires that real property be taxed in proportion to its value, with appraisals handled by the county appraisal district.4Justia. Texas Constitution Article 8 Section 1 Homestead exemptions reduce the taxable value of your primary residence, and a constitutional cap holds annual appraised value growth to no more than 10% a year for homesteads. Even with those limits, a Dallas home valued at $400,000 can produce an annual tax bill above $7,000 once every jurisdiction is counted. If you’re moving from a state that leans on income tax, this is the line item that will surprise you most.
Buying a Car
Motor vehicle purchases trigger a separate tax under Tax Code Chapter 152. The rate is 6.25% of the total price paid, matching the general sales tax rate but administered on its own track.5State of Texas. Texas Tax Code Section 152.021 – Retail Sales Tax At a dealership, the dealer handles it. For a private-party sale, you pay when you register the car at the county tax assessor-collector’s office.
Private sales also run through the standard presumptive value system. The state compares your reported price against a calculated market value, and if your price is below 80% of that value, tax is assessed on 80% of the presumptive value instead of what you paid.6Texas Comptroller of Public Accounts. Standard Presumptive Value (SPV) – Motor Vehicle Tax Guide A certified appraisal can override this, but without one, a low reported price just raises the taxable base.
You have 30 calendar days from the purchase date to pay the tax and register the vehicle. Miss that window and you owe a 5% penalty. Past 30 days late, it climbs to 10%.7Texas Comptroller of Public Accounts. Motor Vehicle – Sales and Use Tax
Running a Business in Dallas
Texas has no corporate income tax, but it does charge a franchise tax on most business entities. Corporations, LLCs, partnerships, banks, and professional associations are all covered.8Texas Comptroller of Public Accounts. Franchise Tax Overview Sole proprietorships and most general partnerships owned entirely by individuals are the main exceptions.
The tax is calculated on “margin,” which is total revenue minus the highest of several deductions: cost of goods sold, employee compensation, 30% of total revenue, or a flat $1 million. The rate is 0.375% of taxable margin for retailers and wholesalers and 0.75% for everyone else.9Texas Comptroller of Public Accounts. Franchise Tax
Small businesses get a real break. Any entity with total revenue at or below $2,650,000 owes no franchise tax.9Texas Comptroller of Public Accounts. Franchise Tax You still have to file the report; the tax due is just zero. That threshold covers most Dallas small businesses.
Hotel Stays
Lodging in Dallas carries a 6% state hotel occupancy tax, and the City of Dallas adds its own local hotel tax on top.10Texas Comptroller of Public Accounts. Local Hotel Occupancy Tax Overview The tax covers hotels, motels, bed-and-breakfasts, and short-term rentals. All layers combined can add 15% or more to a nightly rate.
Federal Taxes Still Apply
No state income tax doesn’t mean no income tax. Dallas residents file a federal Form 1040 every April like everyone else, with 2026 federal rates running from 10% at the bottom up to 37% at the top of the brackets.11Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Social Security tax (6.2% on earnings up to $184,500 in 2026) and Medicare tax (1.45% with no cap) still come out of every paycheck.12Social Security Administration. Contribution and Benefit Base Self-employed workers owe both the employee and employer portions, 15.3% combined.13Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)
Dallas corporations pay the 21% federal corporate income tax on top of the Texas franchise tax. On the estate side, Texas has no state estate or inheritance tax, so only the federal thresholds apply. For 2026, the federal estate tax exemption is $15,000,000 per individual, and the annual gift tax exclusion is $19,000 per recipient.14Internal Revenue Service. What’s New – Estate and Gift Tax
If you’re moving to Dallas expecting pure tax savings, run the whole math. The missing income tax is real, but the sales tax, the property tax, and the vehicle tax all catch up with you in ways a paycheck comparison won’t show.