Texas has no state income tax. The Texas Constitution bans the legislature from taxing the net incomes of individuals, so no state tax is withheld from your paycheck, no estimated state payments are due during the year, and there is no state return to file at tax time.1State of Texas. Texas Constitution Article 8 – Taxation and Revenue The state funds itself through sales taxes, local property taxes, and a franchise tax on businesses instead.
Why Texas Has No Income Tax
The prohibition sits in Article 8, Section 24-a of the Texas Constitution. It forbids any 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 – Taxation and Revenue Voters added it on November 5, 2019, through Proposition 4.
Before Proposition 4, the constitution already required statewide voter approval before any income tax could take effect, but the legislature could put that referendum on the ballot with a simple majority. The 2019 amendment replaced that framework with an outright ban. The only path to a personal income tax now runs through a new constitutional amendment, which requires a two-thirds vote in both the Texas House and Senate plus approval by voters in a statewide election. That two-step barrier makes future adoption extremely unlikely.
What You Pay Instead
Living in Texas does not mean living tax-free. The money the state does not collect from paychecks shows up in other places, chiefly at the register and on your property tax bill.
Sales and Use Tax
Sales tax is the single largest source of state revenue. The state rate is 6.25 percent on most retail purchases, leases, and taxable services. Cities, counties, transit authorities, and special-purpose districts can add up to 2 percent on top, pushing the maximum combined rate to 8.25 percent.2Texas Comptroller of Public Accounts. Sales and Use Tax
Several categories escape the tax. Most unprepared grocery items — fruits, vegetables, meat, dairy, and bread — are not taxed, and neither are prescription medicines. Prepared foods sold by restaurants, delis, and food trucks are taxable, as are candy, soft drinks, and ice.
Local Property Taxes
Texas has no state-level property tax, but local property taxes are a major expense for homeowners and commercial property owners. Counties, school districts, cities, and special districts each set their own rates, and combined effective rates in Texas tend to run well above the national average.
Each county’s central appraisal district determines the market value of all taxable property as of January 1 each year.3Texas Comptroller of Public Accounts. Valuing Property The appraisal district does not set the rates; each local taxing unit does that independently. In most counties, the county tax assessor-collector handles billing and sends the collected funds on to the school districts, cities, and other taxing units.4Texas Comptroller of Public Accounts. Property Tax System Basics Homestead exemptions reduce the taxable value of your primary residence, with larger exemptions available to residents 65 or older and to those with a qualifying disability.5Texas Comptroller of Public Accounts. Property Tax Exemptions
No Estate or Inheritance Tax
Texas does not impose a state estate tax or an inheritance tax. The state’s estate tax, which had been tied to the federal state death tax credit, was permanently repealed when the legislature eliminated Chapter 211 of the Texas Tax Code effective September 15, 2015. When a Texas resident dies, the estate faces only the federal estate tax (if it exceeds the federal exemption) and no additional state-level tax on transferred wealth.
Franchise Tax on Businesses
If you own a business, the picture changes. Most business entities operating in Texas owe the franchise tax, sometimes called the margin tax, for the privilege of doing business in the state. It applies to corporations, limited liability companies, limited partnerships, banking corporations, professional associations, and other legal entities.6State of Texas. Texas Tax Code Chapter 171 – Franchise Tax Sole proprietorships and general partnerships owned entirely by individuals are exempt, as are passive entities that get at least 90 percent of their income from sources like dividends, interest, or rents. Businesses at or below the no-tax-due threshold of $2,650,000 in annualized total revenue for reports due in 2026 and 2027 owe nothing and need not file.7Texas Comptroller of Public Accounts. 2026 Franchise Tax Instructions Form 05-915
You Still Owe Federal Income Tax
Living in Texas does not exempt you from federal income tax. Every Texas resident with income above the standard filing thresholds must file a return with the IRS. For 2026, federal rates range from 10 percent on the lowest bracket of taxable income up to 37 percent on taxable income above $648,100 for single filers and $788,000 for married couples filing jointly.8Internal Revenue Service. 2026 Publication 15-T The brackets in between step through 12, 22, 24, 32, and 35 percent.9Office of the Law Revision Counsel. 26 USC 1 – Tax Imposed
The Sales Tax Deduction Advantage
Texans who itemize on their federal return get a useful option. The IRS lets you choose between deducting state income taxes or state and local sales taxes, and since you have no state income tax to deduct, sales tax is the clear pick.10Internal Revenue Service. Use the Sales Tax Deduction Calculator You can total actual sales tax from your receipts across the year or use the IRS Sales Tax Deduction Calculator to estimate based on your income and location.
The total federal deduction for all state and local taxes combined — sales tax, property tax, and the rest — is capped. Under the One Big Beautiful Bill Act signed into law in 2025, the cap for 2026 is $40,400 ($20,200 for married taxpayers filing separately), a sharp increase from the previous $10,000 limit. The cap phases down for higher-income filers but cannot drop below $10,000. Texas property tax bills alone can be substantial, so many homeowners will still bump against this ceiling even at the higher limit.
Remote Work and Earnings Across State Lines
Because Texas has no income tax, living and working here means no state tax liability on your wages, whether your employer is based in Texas or another state. Working remotely from Texas for an out-of-state company does not create Texas income tax, because none exists.
The reverse situation deserves attention. If you are a Texas resident who temporarily works in a state that does impose an income tax, that state may require you to file a nonresident return and pay tax on wages earned while physically working there. Residents of states with their own income tax can usually offset such a bill with a credit on their home-state return. Texas residents cannot, because there is no Texas return and no Texas liability to credit against. You could end up paying another state’s income tax on that portion of your earnings with nothing on the Texas side to soften it.