Texas does not tax retirement income of any kind. Social Security benefits, pension payments, 401(k) and IRA withdrawals, military retirement pay, and Railroad Retirement benefits all arrive with no state deduction, because Texas has no personal income tax. Federal taxes still apply to most of these income sources, and Texas collects revenue in other ways — chiefly property and sales tax — so a full picture matters when planning where and how to retire.
Is the No-Income-Tax Rule Likely to Change
The rule is written into the Texas Constitution. In 2019, voters approved Proposition 4, adding Section 24-a to Article VIII, which states that “the legislature may not impose a tax on the net incomes of individuals, including an individual’s share of partnership and unincorporated association income.”1State of Texas. Texas Constitution Article 8 Changing this now would require another statewide constitutional amendment approved by voters, not just an act of the legislature.
Social Security in Texas
Your Social Security check comes to you with nothing withheld by the state. There is no Texas return to file on it, and Railroad Retirement benefits — both Tier 1 and Tier 2 — receive identical treatment.
The federal government is another matter. The IRS uses a figure it calls “combined income,” which is your adjusted gross income plus any nontaxable interest plus half of your Social Security benefits. For single filers, combined income between $25,000 and $34,000 can make up to 50 percent of benefits taxable at the federal level; above $34,000, up to 85 percent becomes taxable.2Social Security Administration. Must I Pay Taxes on Social Security Benefits For married couples filing jointly, the 50-percent threshold begins at $32,000 and the 85-percent threshold at $44,000.3Internal Revenue Service. IRS Reminds Taxpayers Their Social Security Benefits May Be Taxable
The One, Big, Beautiful Bill Act, signed in 2025, adds a temporary federal deduction for Social Security recipients age 65 and older. Through the 2028 tax year, eligible single filers can deduct up to $6,000 of Social Security income, and joint filers up to $12,000. The combined-income thresholds are unchanged, but the deduction reduces the amount ultimately subject to federal tax, and many seniors with modest income will owe no federal tax on benefits at all.
Pensions, 401(k)s, IRAs, and Military Retirement
Texas taxes none of it. That covers traditional defined-benefit pensions, 401(k) and 403(b) plans, 457(b) plans used by state and local governments, the federal Thrift Savings Plan, and government pensions including the Teacher Retirement System of Texas, the Employees Retirement System of Texas, FERS, and CSRS. Traditional and Roth IRAs are treated the same way. Lump sums and monthly annuity payments are treated the same way. Pre-tax and Roth contributions are treated the same way.
Military retirement pay — active-duty, reserve, or disability retirement — arrives in Texas with no state deduction, which is one reason the state draws military retirees.
Federal income tax still applies to the taxable portion of most of these distributions. Texas simply adds nothing on top and requires no state withholding or state reporting.
RMDs, Early Withdrawals, and Federal Penalties
Required minimum distributions are a federal rule, not a Texas rule, but they still hit Texas retirees. Under the SECURE 2.0 Act, if you were born between 1951 and 1959, RMDs generally start at age 73. If you were born in 1960 or later, they start at 75.4Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs) The first RMD is due by April 1 of the year after you reach the applicable age; each one after that is due by December 31. Missing an RMD triggers a federal penalty. Texas adds nothing.
Taking money from a traditional IRA or employer plan before age 59½ generally triggers a 10 percent federal penalty on top of regular federal income tax.5Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions Federal exceptions include permanent disability, unreimbursed medical expenses exceeding 7.5 percent of adjusted gross income, and distributions after the account owner’s death. Roth IRA contributions (though not earnings) can come out at any age without penalty. Again, no Texas penalty stacks on top.
Estate and Inheritance Tax
Texas has no estate tax and no inheritance tax. When a Texas resident dies, the state takes nothing regardless of estate size, and heirs who inherit retirement accounts or other assets owe the state nothing.
Federal estate tax can still reach larger estates. For 2026, the federal exemption is $15,000,000 per individual, and only value above that threshold is taxed, at a top rate of 40 percent.6Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One, Big, Beautiful Bill7Office of the Law Revision Counsel. 26 USC 2001 – Imposition and Rate of Tax Married couples can effectively shield up to $30,000,000 through portability of a deceased spouse’s unused exemption.
The Texas Taxes You Will Still Pay
No income tax does not mean low taxes overall. Two categories matter for most retirees.
Property Tax
Texas funds schools and local services largely through property tax. The effective rate on owner-occupied homes is roughly 1.36 percent, among the highest in the country. On a $300,000 home, that is about $4,080 a year before exemptions.
Retirees get real relief. School districts must provide a $140,000 homestead exemption on a primary residence, and homeowners 65 or older qualify for an additional $60,000 exemption on top of that.8Texas Comptroller. Property Tax Exemptions Cities and counties may add their own exemptions. Once you turn 65, the school district portion of your property tax is frozen at the amount owed the year you qualified, so future rate or valuation increases do not raise that piece of your bill.
Sales Tax
The state sales tax rate is 6.25 percent, and local jurisdictions can add up to 2 percent, for a combined maximum of 8.25 percent. Most Texas cities charge the full local add-on. Groceries, prescription medications, and over-the-counter drugs are exempt from Texas sales tax, which softens the rate for retirees whose spending leans toward those categories.