No, Texas does not have a state income tax. Wages, salaries, investment returns, and pass-through business income are not taxed at the state level, and a 2019 constitutional amendment now prohibits the legislature from creating one. The trade-off is that Texas leans on sales and property taxes to fund public services, and every resident still owes federal income tax to the IRS.
The Constitutional Ban
The prohibition is written into the Texas Constitution itself. Article VIII, Section 24-a says the legislature “may not impose a tax on the net incomes of natural persons, including an individual’s share of partnership and unincorporated association income.”1State of Texas. Texas Constitution Article VIII – Taxation and Revenue That reaches wages, investment income, and business income that passes through to individual owners.
Before 2019, the constitution took a softer line. The old Section 24 simply required voter approval in a statewide referendum before any income tax could take effect. Proposition 4, approved by voters in November 2019, repealed that section and replaced it with the flat ban in Section 24-a. To reverse course, the legislature would first have to amend the constitution, which requires a two-thirds vote in both chambers and another statewide vote. That procedural wall is why the ban is treated as effectively permanent.
Sales Tax
Without income tax revenue, Texas relies heavily on consumption taxes. The state sales tax rate is 6.25 percent on most tangible goods and many services.2State of Texas. Texas Tax Code Section 151.051 – Sales Tax Imposed Cities, counties, transit authorities, and special-purpose districts can layer their own sales taxes on top, but the combined local add-on is capped at 2 percent. The most you’ll pay at a register in Texas is 8.25 percent.3Texas Comptroller of Public Accounts. Local Sales and Use Tax Collection – A Guide for Sellers
Groceries are the exemption most people notice. Food products for home consumption, including meat, dairy, produce, cereals, and snack items bought at a grocery store, are exempt.4State of Texas. Texas Tax Code Section 151.314 Prepared food is different. Restaurant meals, heated foods, and items from delis and food trucks are taxable, as are soft drinks, candy, and individual-sized snack portions from vending machines.
Once a year the state also holds a back-to-school sales tax holiday. In 2026 it runs from Friday, August 7 through Sunday, August 9, and covers most clothing, footwear, school supplies, and backpacks priced under $100 per item, in-store and online.5Texas Comptroller of Public Accounts. Sales Tax Holiday Items at or above $100 don’t qualify, and jewelry, athletic gear, and luggage are excluded regardless of price.
Property Tax Is the Real Trade-Off
No income tax does not mean low taxes overall. Texas has some of the highest property taxes in the country, with an effective rate on owner-occupied homes averaging roughly 1.4 percent of market value. On a home appraised at $350,000, that’s nearly $4,900 a year. Rates are set by local taxing entities such as school districts, cities, counties, and special districts, so what you owe depends heavily on where you live.
Homestead Exemption
The main relief tool is the homestead exemption. If you own and occupy a home as your principal residence, school districts must exempt $140,000 of the appraised value from school property taxes.6Texas Comptroller of Public Accounts. Property Tax Exemptions Other local taxing units can add an exemption of up to 20 percent of appraised value, with a floor of $5,000. To claim these, file an application with your county appraisal district, generally before May 1.
The 10 Percent Appraisal Cap
Texas also limits how fast your home’s taxable value can rise. Under Tax Code Section 23.23, a homesteaded property’s appraised value cannot increase by more than 10 percent per year over the prior year’s appraised value, plus the value of any new improvements.7Texas Comptroller of Public Accounts. Valuing Property The cap kicks in the second year after you receive your homestead exemption. In a fast-appreciating market it can hold your taxable value well below true market value.
Federal Income Tax Still Applies
Living in Texas does not reduce your federal tax bill by a dollar. Every resident who meets the IRS filing thresholds must file a federal return and pay federal income tax on worldwide income, including wages, self-employment earnings, investment gains, rental income, and retirement distributions.8Internal Revenue Service. Taxation of U.S. Residents
For 2026, federal brackets range from 10 percent on the first $12,400 of taxable income for single filers up to 37 percent on income above $640,600 for single filers or $768,700 for married couples filing jointly.9Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Employers withhold federal income tax, Social Security, and Medicare from every paycheck regardless of state residence.
Freelancers, independent contractors, and small business owners carry an added federal layer. Self-employment tax combines Social Security and Medicare at 15.3 percent: 12.4 percent for Social Security on net earnings up to $184,500 in 2026, and 2.9 percent for Medicare on all net earnings with no cap.10Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)11Social Security Administration. Contribution and Benefit Base Higher earners face an additional 0.9 percent Medicare surtax above $200,000 for single filers or $250,000 for joint filers. The rate hits harder than for W-2 employees because you pay both the employee and employer halves.
What About Businesses and Estates
The income tax ban applies to natural persons. Texas taxes business entities separately through the franchise tax, which reaches corporations, LLCs, partnerships, and other legal entities formed or doing business in the state.12Texas Comptroller of Public Accounts. Franchise Tax The tax is based on margin at 0.75 percent for most businesses and 0.375 percent for retailers and wholesalers. Entities with total annualized revenue at or below $2,650,000 owe nothing, though they still have to file the report.13Texas Comptroller of Public Accounts. Franchise Tax Overview Sole proprietorships are generally exempt unless they operate through a formal entity.
Texas also imposes no state estate tax, no inheritance tax, and no gift tax. When a Texas resident dies, no state estate return is required and heirs receive property without a state tax attached. Federal estate tax still applies above the federal exemption, but the state itself takes nothing from the transfer.