Texas does not tax Social Security benefits or pension income. The state constitution bans a personal income tax altogether, so Social Security, public and private pensions, 401(k) and IRA withdrawals, and annuity payments all arrive without any state withholding. Federal income tax still applies to most of that income, and Texas retirees face property and sales taxes that shape the real cost of living here.
Why Texas Can’t Tax Your Retirement Income
Article VIII, Section 24-a of the Texas Constitution, added by voters in 2019, prohibits the legislature from taxing an individual’s net income.1State of Texas. Texas Constitution Article 8 – Taxation and Revenue That ban covers wages, Social Security, pensions, 401(k) distributions, traditional and Roth IRA withdrawals, and annuity payments alike. Changing it would require another statewide constitutional vote.
You don’t file a Texas state income tax return. Your pension administrator and IRA custodian will not withhold anything for Texas. If you move to Texas from a state that does tax retirement income, update your withholding elections so you aren’t still having another state’s tax pulled from your checks.
What the Federal Government Still Taxes
No state tax does not mean no tax. Social Security benefits become partially taxable at the federal level once your “combined income” — adjusted gross income, plus nontaxable interest, plus half of your Social Security — crosses set thresholds:2Internal Revenue Service. IRS Reminds Taxpayers Their Social Security Benefits May Be Taxable
- Single filers: combined income between $25,000 and $34,000 makes up to 50% of benefits taxable; above $34,000, up to 85% is taxable.
- Married filing jointly: between $32,000 and $44,000, up to 50%; above $44,000, up to 85%.
Those thresholds have not been adjusted for inflation since the 1980s and 1990s, so more retirees hit them each year. Pension payments, 401(k) distributions, and traditional IRA withdrawals count toward combined income and are themselves taxed as ordinary income on your federal return. Qualified Roth IRA distributions come out federal-tax-free and don’t push your combined income higher.
Temporary Senior Deduction for 2025–2028
The One, Big, Beautiful Bill Act created an additional $6,000 federal deduction for taxpayers who reach age 65 by the end of the tax year, or $12,000 for a married couple where both qualify. It’s available whether you itemize or take the standard deduction, and it stacks on the existing additional standard deduction for seniors.3Internal Revenue Service. One, Big, Beautiful Bill Act – Tax Deductions for Working Americans and Seniors It phases out above $75,000 modified adjusted gross income for single filers and $150,000 for joint filers, and applies for tax years 2025 through 2028.
Property Tax Relief Carries More Weight in Texas
Property tax is the largest tax most Texas retirees pay, and the state offers several protections once you turn 65. You must own the home and use it as your primary residence as of January 1 of the tax year, and you apply through your county appraisal district.
Over-65 Homestead Exemption
Every Texas homeowner using a property as a primary residence gets a general homestead exemption from school district taxes. Homeowners aged 65 or older receive an additional $60,000 school district exemption on top of that. Cities, counties, and other local taxing units may adopt their own homestead exemptions, which cannot be set below $3,000.4Texas Comptroller of Public Accounts. Property Tax Exemptions
School Tax Ceiling
Once the over-65 exemption kicks in, your school district tax bill is frozen at the amount you paid the first year you qualified. Rising market values don’t lift it; only improvements like a room addition or garage can.5State of Texas. Texas Tax Code 11.13 – Residence Homestead If you sell and buy another Texas home, the appraisal district issues a certificate showing the percentage of taxes you paid relative to the ceiling, and that percentage transfers to the new property.6Texas Comptroller of Public Accounts. School Tax Ceiling Certificate for Homeowner Age 65 or Older
Property Tax Deferral
Under Tax Code Section 33.06, homeowners 65 and older can defer property tax payments on a primary residence. Interest accrues on the deferred balance, but no taxing unit can force a tax sale while the deferral is in place. The deferred taxes and interest come due when you no longer own or occupy the home.
Sales Tax: Where Texas Gets Its Revenue
Texas funds itself through consumption taxes. The state sales tax rate is 6.25%, and local jurisdictions can add up to 2%, for a combined maximum of 8.25%.7State of Texas. Texas Tax Code 151.051 – Sales Tax Imposed Groceries and most food bought for home consumption are exempt, and so are prescription medications. That takes a real bite out of the day-to-day tax burden for retirees.
If you itemize federal deductions, you can elect to deduct state and local sales taxes on Schedule A in place of state income taxes, which Texas residents don’t pay anyway.8Internal Revenue Service. Topic No. 503, Deductible Taxes You can use actual receipts or the IRS optional sales tax tables. For 2026, the combined cap on state and local taxes — property plus sales — is $40,400 for most filers and $20,200 if married filing separately.9Internal Revenue Service. Correction to State and Local Income Tax Deduction Amount in the 2026 Form 1040-ES That’s a jump from the $10,000 cap in prior years, and it can matter for Texas retirees carrying significant property tax bills.
Watch Out for Medicare IRMAA
Even without a state income tax, your retirement withdrawals can raise what you pay for Medicare. If your modified adjusted gross income exceeds set thresholds, you pay an Income-Related Monthly Adjustment Amount (IRMAA) on top of the standard Part B and Part D premiums. IRMAA uses your tax return from two years earlier, so 2024 income drives your 2026 premiums.
For 2026, the standard Part B premium is $202.90 per month. Surcharges start once single-filer MAGI exceeds $109,000 or joint MAGI exceeds $218,000, and climb through five higher brackets to a top Part B premium of $689.90 per month at $500,000 single or $750,000 joint.10Centers for Medicare and Medicaid Services. 2026 Medicare Parts A and B Premiums and Deductibles Part D carries parallel surcharges at the same brackets, from $14.50 to $91.00 per month.
A large pension payment, a 401(k) withdrawal, or a Roth conversion can all push you into a higher IRMAA bracket. Because the lookback is two years, timing a big withdrawal thoughtfully can keep a one-year income spike from raising your Medicare premiums.
Texas Doesn’t Tax Estates or Inheritances Either
Texas has no state estate tax and no inheritance tax. The legislature repealed the state’s inheritance tax in 2015, and in November 2025 voters approved Proposition 8 with more than 72% support, locking the ban into the constitution.11Ballotpedia. Texas Proposition 8, Prohibit Estate Taxes and New Taxes on Estate Transfers, Inheritances, and Gifts Amendment (2025) Retirement savings pass to your heirs without any state-level reduction, and no state return or payment goes to the Texas Comptroller. Federal estate tax still applies to larger estates — the 2026 basic exclusion is $15,000,000 per individual — but it won’t reach most families.12Internal Revenue Service. Whats New – Estate and Gift Tax