Texas has no state income tax — but makes up for it with higher property and sales taxes. Here’s what you need to know.
Texas Tax Overview
| Tax Type | Rate | Notes |
|---|---|---|
| State Income Tax | 0% | None |
| Property Tax | 1.6-2.5% | Among highest in US |
| Sales Tax | 6.25% + local | Up to 8.25% total |
| Gas Tax | $0.20/gallon | Below average |
No State Income Tax
Texas is one of nine states with no state income tax:
- Texas
- Florida
- Nevada
- Washington
- Wyoming
- South Dakota
- Tennessee
- Alaska
- New Hampshire (dividends/interest only)
What This Means for Your Paycheck
| Salary | TX Take-Home | CA Take-Home | Difference |
|---|---|---|---|
| $75,000 | $57,000 | $52,500 | +$4,500 |
| $100,000 | $75,000 | $68,000 | +$7,000 |
| $150,000 | $110,000 | $97,500 | +$12,500 |
| $200,000 | $144,000 | $125,000 | +$19,000 |
Approximate after federal taxes, comparing TX to California
High earners save significantly by living in Texas vs. high-tax states.
Texas Property Tax
Texas has some of the highest property taxes in the nation to compensate for no income tax.
| County | Effective Rate | On $400K Home |
|---|---|---|
| Harris (Houston) | 2.09% | $8,360/year |
| Dallas | 1.93% | $7,720/year |
| Tarrant (Fort Worth) | 2.16% | $8,640/year |
| Bexar (San Antonio) | 1.92% | $7,680/year |
| Travis (Austin) | 1.80% | $7,200/year |
| Collin (Plano) | 1.81% | $7,240/year |
| Denton | 1.87% | $7,480/year |
Property Tax Exemptions
| Exemption | Savings |
|---|---|
| Homestead exemption | $100,000 off school taxes |
| Over 65 exemption | Additional $10,000 |
| Disabled veteran | Up to 100% exemption |
| Optional local exemptions | Varies by county |
The homestead exemption saves homeowners $1,500-2,500/year on average.
Texas Sales Tax
| Component | Rate |
|---|---|
| State sales tax | 6.25% |
| Local tax (max) | +2% |
| Maximum combined | 8.25% |
Most major Texas cities charge the maximum 8.25%.
Sales Tax Exemptions
| Item | Taxed? |
|---|---|
| Groceries (unprepared food) | No |
| Prescription drugs | No |
| Clothing | Yes |
| Electronics | Yes |
| Restaurant meals | Yes |
| Vehicles | Yes (6.25%) |
Texas vs. Other States: Total Tax Burden
| State | Income Tax | Property Tax | Sales Tax | Rank (Low=Better) |
|---|---|---|---|---|
| Texas | 0% | 1.80% | 8.25% | 34 (middle) |
| California | 13.3% | 0.73% | 7.25% | 48 |
| New York | 10.9% | 1.72% | 8.52% | 50 |
| Florida | 0% | 0.86% | 7.0% | 15 |
| Nevada | 0% | 0.60% | 8.23% | 9 |
Rankings from Tax Foundation, 2024
Despite no income tax, Texas ranks only middle-of-the-pack because of high property taxes.
Who Benefits Most from Texas Taxes?
Texas taxes favor:
- High-income earners (no income tax saves most)
- Renters (avoid high property taxes)
- Retirees receiving pensions/Social Security
- Business owners with high profits
- Tech workers with stock compensation
Texas taxes hurt:
- Homeowners (high property tax)
- Large families (property + sales tax)
- Low-income earners (regressive sales tax)
- Those buying expensive vehicles
Texas Franchise Tax (Business)
If you run a business in Texas:
| Revenue | Tax Rate |
|---|---|
| Under $1.23 million | No tax due |
| Retail/wholesale | 0.375% |
| Other businesses | 0.75% |
The franchise tax is Texas’s corporate/business tax.
Retirement Income in Texas
| Income Type | State Tax |
|---|---|
| Social Security | Not taxed |
| Pensions | Not taxed |
| 401(k)/IRA withdrawals | Not taxed |
| Investment income | Not taxed |
Texas is excellent for retirees — no state taxes on any retirement income.
Moving to Texas: Tax Savings Calculator
Example: $150K Salary Moving from California to Texas
| Factor | California | Texas | Savings |
|---|---|---|---|
| State income tax | $12,500 | $0 | +$12,500 |
| Property tax ($500K home) | $3,650 | $9,000 | -$5,350 |
| Sales tax difference | ~$200 | ~$300 | -$100 |
| Net annual savings | — | — | +$7,050 |
Higher earners save more; homeowners save less.
Texas Tax Calendar
| Deadline | What’s Due |
|---|---|
| April 15 | Federal income tax |
| January 31 | Property tax due |
| Quarterly | Estimated federal taxes (if applicable) |
No state income tax filing required!
Tips for Texans
- Claim homestead exemption immediately — Saves $1,500+/year
- Protest property tax annually — Values often inflated
- Consider renting if mobile — Avoids high property tax
- No state return needed — One less filing headache
- Watch local sales taxes — Budget for 8.25% in cities
Texas vs. Florida (Both No Income Tax)
| Factor | Texas | Florida |
|---|---|---|
| Income tax | 0% | 0% |
| Property tax | 1.80% avg | 0.86% avg |
| Sales tax | 8.25% max | 7.5% max |
| Homestead exemption | $100K | $50K |
| Overall tax burden rank | 34 | 15 |
Florida has lower property taxes, making it more tax-friendly overall.
Bottom Line
Texas’s no state income tax saves high earners thousands annually, but high property taxes (1.6-2.5%) offset some savings for homeowners. Overall, Texas ranks middle-of-the-pack for total tax burden. Best for: high earners, renters, and retirees. Less ideal for homeowners with expensive properties.