No, Texas does not have an income tax. The state does not tax wages, salaries, capital gains, retirement distributions, or Social Security benefits, and the Texas Constitution prohibits the legislature from creating a personal income tax without a voter-approved constitutional amendment. Texans still pay federal income tax, and the state funds itself largely through sales tax, locally administered property tax, and a franchise tax on businesses.
The Constitution Blocks a Personal 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 older provision, the Bullock Amendment from 1993, which had required voter approval before any income tax could take effect.
Changing this now takes two steps. The legislature would have to pass a proposed constitutional amendment with two-thirds support in both chambers, and then a majority of Texas voters would have to approve it at an election. A personal income tax in Texas is very unlikely under that framework.
What Texas Doesn’t Tax
Because Texas has no personal income tax at all, several categories of income that other states reach are untouched here:
- Wages and salaries, whether from a Texas employer or a remote one
- Capital gains from investments, stock sales, or real estate
- Distributions from 401(k) plans, IRAs, pensions, and annuities
- Social Security benefits
Texas also imposes no state estate tax and no inheritance tax. When a Texas resident dies, the estate is not taxed by the state regardless of its size. Federal estate tax can still apply, but the exemption is high: for 2026, the federal estate tax exemption is $15,000,000 per individual, and married couples can effectively double that through portability.2Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Very few Texas estates end up owing any death-related tax at all.
What Texans Pay Instead
Sales and Use Tax
Sales tax is a primary funding source for state government. Texas imposes a 6.25 percent state sales and use tax on most retail sales, leases, and rentals of goods, and on many services. Local jurisdictions can add up to 2 percent more, so the combined rate maxes out at 8.25 percent.3Texas Comptroller. Sales and Use Tax
Some categories are exempt. Prescription drugs, insulin, and over-the-counter medicines are not taxed.4Legal Information Institute. 34 Texas Admin. Code 3.284 – Drugs, Medicines, Medical Equipment Groceries are not exempt from the general sales tax the way they are in many other states, which often surprises people moving here. Most food purchased at a grocery store is taxable at the full combined rate.
Property Tax
There is no state property tax. All property taxes in Texas are set and collected by local taxing units — school districts, cities, counties, and special districts — to pay for schools, roads, and emergency services.5Texas Comptroller. Property Tax Assistance Because Texas does not spread its revenue burden across an income tax, property taxes here tend to run higher than the national average.
Homeowners can lower their bill through homestead exemptions on a primary residence. School districts must provide a $140,000 exemption on the appraised value. On a home appraised at $350,000, school district taxes would be calculated as if the home were worth $210,000.6Texas Comptroller. Property Tax Exemptions
Additional exemptions stack on top of that base:
- Homeowners age 65 or older get an extra $60,000 school district exemption
- Disabled homeowners get the same additional $60,000 school district exemption
- Any taxing unit can adopt a local option exemption of up to 20 percent of appraised value, with a minimum of $5,000
You have to apply through your county appraisal district. The exemption is not automatic.
Business Owners: The Franchise Tax Still Applies
Individuals pay no income tax, but Texas does tax businesses through the franchise tax, which applies to corporations, LLCs, partnerships, and most other entities. Sole proprietorships and certain passive entities are generally exempt.7Texas Comptroller. Franchise Tax Overview
For the 2026 and 2027 report years, the tax is 0.375 percent of taxable margin for businesses primarily in retail or wholesale trade, and 0.75 percent for all other taxable entities. Businesses with annualized total revenue at or below $2,650,000 fall under the “no tax due” threshold and owe nothing.8Texas Comptroller. Franchise Tax That threshold rose from $2,470,000 in the previous cycle, so check the current figure before assuming you’re covered.
Since 2024, entities below the threshold no longer file a franchise tax report, but they still have to file an annual information report.9Texas Comptroller. Main Menu Franchise Tax Late filings carry a $50 penalty per report. If you owe tax and pay 1 to 30 days late, a 5 percent penalty applies; more than 30 days late, 10 percent.8Texas Comptroller. Franchise Tax Persistent failure to file can lead to forfeiture of the entity’s right to transact business in Texas.
Remote Work for an Out-of-State Employer
Texas will not tax your wages no matter where your employer sits. Another state might. Several states apply a “convenience of the employer” rule, taxing workers based on where the employer’s office is located even if the employee never physically works there. New York, Pennsylvania, Delaware, Nebraska, Connecticut, New Jersey, Alabama, and Oregon have some version of this rule.
If you live in Texas and work remotely for a company headquartered in one of those states, you may owe income tax to that state. Because Texas has no income tax of its own, there is nothing to credit the payment against. Check whether your employer is already withholding, and whether you need to file a nonresident return.
Federal Taxes and the SALT Deduction
Living in Texas eliminates state income tax but not federal. Every U.S. resident earning above the applicable filing threshold has to file with the IRS and pay federal income tax on worldwide income.10Internal Revenue Service. Here’s Who Needs to File a Tax Return
Texans can still claim the federal deduction for state and local taxes (SALT). The deduction covers property taxes plus either state income taxes or state sales taxes, whichever is higher. Since Texans pay no state income tax, the choice is sales taxes plus property taxes.
Under the One Big Beautiful Bill Act signed into law in July 2025, the SALT deduction cap rose from $10,000 to $40,000 effective for 2025. The cap increases 1 percent each year through 2029, making the 2026 cap roughly $40,400. Married couples filing separately get half that amount per person. The cap phases down for filers earning above $500,000 at a rate of 30 percent, with a floor of $10,000 for the highest earners.11Bipartisan Policy Center. SALT Deduction Changes in the One Big Beautiful Bill Act For Texas homeowners with large property tax bills, the higher cap allows substantially more of those payments to reduce federal taxable income than the old $10,000 limit did.