No, Texas does not have a personal income tax. The state constitution prohibits the legislature from imposing one on individuals, so wages, capital gains, retirement withdrawals, and Social Security benefits are all free from state tax.1FindLaw. Texas Constitution Art. 8, Section 24-a – Individual Income Tax Prohibited Texas raises revenue through sales tax, locally administered property tax, and a business franchise tax instead.
Why Texas Can’t Easily Add an Income Tax
Article VIII, Section 24-a of the Texas Constitution says the legislature “may not impose a tax on the net incomes of individuals, including an individual’s share of partnership and unincorporated association income.”1FindLaw. Texas Constitution Art. 8, Section 24-a – Individual Income Tax Prohibited That language was added by Proposition 4, which voters approved in November 2019. It replaced an earlier provision, the Bullock Amendment from 1993, that had merely required voter approval before any income tax could take effect.
Changing the current ban would take a constitutional amendment: two-thirds support in both chambers of the legislature, followed by a majority vote at the ballot box. That two-step hurdle makes a personal income tax in Texas very unlikely in the foreseeable future.
What Income Isn’t Taxed by Texas
Because there is no state income tax at all, Texas also has no separate levy on capital gains from stocks, investment property, or business sales. Several other states tax capital gains either through their general income tax or through a dedicated capital gains tax; Texans keep the full gain after federal tax.
Retirement income gets the same treatment. Distributions from 401(k) plans, IRAs, pensions, and annuities are not taxed by the state. Social Security benefits are also fully exempt from Texas tax. For retirees comparing where to live, that blanket exemption is one of the clearest financial advantages Texas offers.
Sales Tax Is the Main Thing Texans Pay
Sales tax does a lot of the revenue work that income tax does elsewhere. The state imposes a 6.25 percent sales and use tax on most retail sales, leases, and rentals of goods, along with many services. Cities, counties, transit authorities, and special districts can add up to 2 percent on top, so the combined rate caps out at 8.25 percent.2Texas Comptroller. Sales and Use Tax
Some categories are exempt. Prescription drugs, insulin, and over-the-counter medicines are not subject to sales tax.3Legal Information Institute. 34 Texas Admin. Code 3.284 – Drugs, Medicines, Medical Equipment Groceries, however, are a frequent surprise for people moving in from states that exempt food: most grocery-store food in Texas is taxable at the full combined rate.
Property Tax Does the Rest of the Work
Texas has no state property tax. All property tax is set and collected locally by school districts, cities, counties, and special districts to fund schools, roads, and emergency services.4Texas Comptroller. Property Tax Assistance Without an income tax to spread the burden, property tax bills in Texas tend to run above the national average, which is the main trade-off homeowners feel.
Homestead Exemptions
If a home is your primary residence, you can cut the taxable value through homestead exemptions. School districts must grant a $140,000 exemption on the appraised value of a residence homestead. A home appraised at $350,000 would be taxed by the school district as if it were worth $210,000.5Texas Comptroller. Property Tax Exemptions
Extra exemptions are available for specific homeowners:
- Homeowners age 65 or older get an additional $60,000 school district exemption on top of the standard $140,000.
- Disabled homeowners get the same additional $60,000 school district exemption.
- Any taxing unit may adopt a local option exemption of up to 20 percent of appraised value, with a $5,000 minimum.
These stack. A homeowner 65 or older can see a combined $200,000 reduction in taxable value for school district purposes.5Texas Comptroller. Property Tax Exemptions You have to apply through your county appraisal district; the exemption isn’t automatic.
No State Estate or Inheritance Tax
When a Texas resident dies, the state takes nothing from the estate regardless of its size. Texas doesn’t impose an estate tax or an inheritance tax.
Federal estate tax can still apply, but the threshold is high. For 2026, the federal estate tax exemption is $15,000,000 per individual, and married couples can effectively double that through portability.6Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Between the missing state tax and the federal exemption, very few Texas estates owe anything death-related.
Remote Work for an Out-of-State Employer
Living in Texas doesn’t automatically shield your paycheck from every state’s income tax. Texas itself will never tax your wages. But if you work remotely for a company based in another state, that state may claim the right to tax what you earn.
Several states apply a “convenience of the employer” rule, which taxes a remote worker based on where the employer’s office is located, even if the employee never physically works there. States using some version of this rule include New York, Pennsylvania, Delaware, Nebraska, Connecticut, New Jersey, Alabama, and Oregon. If your employer sits in one of those states, you may owe income tax there, and because Texas has no income tax, there’s no state credit to offset the bill. Check your pay stubs for out-of-state withholding and ask whether you need to file a nonresident return.
Federal Taxes Still Apply
No state income tax does not mean no income tax. Every U.S. resident earning above the IRS filing threshold still files a federal return and pays federal income tax on worldwide income.7Internal Revenue Service. Here’s Who Needs to File a Tax Return Living in Texas erases the state layer; the federal layer is unchanged.
There is one piece of good federal news tied to living here. The federal state and local tax (SALT) deduction lets you deduct property taxes plus either state income tax or state sales tax, whichever is higher. For Texans, that means property tax plus sales tax. Under the One Big Beautiful Bill Act signed in July 2025, the SALT cap rose from $10,000 to $40,000, effective for 2025, and increases by 1 percent each year through 2029, bringing the 2026 cap to roughly $40,400. Married couples filing separately get half that per person. For filers earning above $500,000, the cap phases down at 30 percent until it bottoms out at $10,000 for the highest earners.8Bipartisan Policy Center. SALT Deduction Changes in the One Big Beautiful Bill Act For Texas homeowners with heavy property tax bills, the higher cap now lets more of those payments reduce federal taxable income than the old $10,000 limit allowed.