Does Texas Have State Income Tax?

Texas has no state income tax

Texas does not tax wages, salaries, or other personal income at the state level. A constitutional amendment adopted by voters in 2019 reinforced this by requiring any future state income tax to be approved directly by Texas voters, in addition to legislative approval — making it significantly harder to introduce one than in states without this constitutional requirement.

This applies to all forms of personal income, including wages, salaries, tips, interest, dividends, retirement account withdrawals, and capital gains. Texas residents report none of this income on a state return, because no state individual income tax return exists.

How Texas funds state and local government instead

Texas relies primarily on sales tax and local property tax for state and local government revenue. The state sales tax rate is 6.25%, and local jurisdictions — cities, counties, transit authorities, and special-purpose districts — can add up to 2% more, for a combined rate as high as 8.25% in many areas.

Property taxes in Texas are assessed and collected locally by county appraisal districts and are generally higher, as a share of home value, than in many states that do levy an income tax — a common trade-off in states without a personal income tax. Many Texas businesses above a revenue threshold are also subject to the state franchise tax, administered by the Texas Comptroller of Public Accounts — this is a business-level tax based on a measure of margin or revenue, not a personal income tax on business owners' wages.

What this means for a paycheck

A Texas paycheck has no state income tax withholding line, unlike paychecks in most other states. Federal income tax, Social Security, and Medicare withholding still apply the same way they do nationwide, calculated the same way regardless of the state of residence. An employee who moves from a state with income tax to Texas will generally see a paycheck increase equal to the amount that was previously withheld for state tax, assuming the same gross pay.

Federal taxes still apply

Texas residents are still required to file a federal individual income tax return with the IRS if they meet federal filing thresholds — federal filing deadlines apply the same way as in any other state, since only the state-level filing is skipped. Texas residents with income from another state that does levy an income tax may still owe tax to that other state on income sourced there, depending on that state's nonresident filing rules.

How this compares to states with an income tax

States that levy an income tax, such as California and New York, generally rely less heavily on sales and property tax as a share of total revenue, since income tax provides an additional revenue stream. The absence of a state income tax in Texas does not by itself indicate an overall lower or higher total state and local tax burden — that comparison depends on income level, property value, and spending patterns, since sales and property tax make up a larger share of the total in a no-income-tax state.

Sales tax exemptions

Texas exempts certain categories from the state sales tax, including most unprepared grocery food items and prescription medications. The state also holds periodic sales tax holidays — set by the Legislature and announced by the Comptroller — during which specific categories of goods, such as school supplies or emergency preparation items, are temporarily exempt from sales tax.

Property tax relief programs

Because Texas relies heavily on property tax revenue in the absence of an income tax, the state offers several property tax relief programs, including a homestead exemption that reduces the taxable value of a primary residence, and additional exemptions for taxpayers who are 65 or older or who have a qualifying disability. These exemptions are applied at the local level by county appraisal districts under rules set at the state level.

Frequently Asked Questions