Does Texas have a state income tax? No. Here is what Texans pay instead

No. Texas does not tax the income of individuals, and no Texas city or county does either. The Texas Comptroller, the agency that collects the state’s taxes, says so in its field guide to the taxes of Texas: “Texans pay federal income taxes but not state or local income taxes.”

So there is no Texas income tax return to file and no state income tax taken out of a Texas paycheck. The state raises its tax revenue in other ways, mainly sales and use tax, along with a franchise tax on businesses and taxes on motor vehicle sales, motor fuel, oil and gas production, insurance, alcohol and tobacco. It does not levy a property tax at all; property tax in Texas is local.

The rule is in the Texas Constitution, Article 8, Section 24-a: “The legislature may not impose a tax on the net incomes of individuals, including an individual’s share of partnership and unincorporated association income.” Voters adopted it as Proposition 4 on November 5, 2019. It replaced Section 24, adopted in 1993, which had let a personal income tax take effect only if voters approved it, and which was repealed the same day.

Because the ban is in the constitution, an ordinary law passed by the legislature cannot create an income tax on individuals. It would take another constitutional amendment, approved by two-thirds of the members of each house of the legislature and then by a majority of Texas voters.

Voters have added related bans since. Section 25, adopted November 7, 2023, bars a tax on the wealth or net worth of an individual or family. On November 4, 2025, voters added Section 24-b, which bars a tax on the realized or unrealized capital gains of an individual, family, estate or trust, and Section 26, which bars state estate, inheritance and other death taxes. Businesses are taxed separately, through the franchise tax described below.

In 2026, Texas charges a 6.25% state sales and use tax on retail sales, leases and rentals of most goods, and on taxable services. Cities, counties, special purpose districts and transit authorities can add up to 2% more, for a combined maximum of 8.25%. Local rates vary from place to place, and the Comptroller’s Sales Tax Rate Locator finds the rate for any Texas address.

Use tax is the other half of it. If you buy something taxable from a seller who does not charge Texas tax, such as an out-of-state online store, and store or use it in Texas, you owe the tax yourself at the same rates. Without a sales tax permit, you report use tax on 2026 purchases on Form 01-156, the Texas Use Tax Return, by January 20, 2027, if the year’s total is under $1,000, or by the 20th of the month after the total reaches $1,000. Texas gives credit for sales or use tax paid to another state.

Sales tax is the state’s largest single source of tax revenue: the Comptroller says it raised about 58 cents of each state tax dollar in fiscal 2025. It is also the Texas tax most likely to help on your federal return, as the section on the federal return below explains.

Texas has no state property tax. The Comptroller does not collect it or set its rates; local taxing units do. Counties and school districts tax all nonexempt property in their area, and you may also pay a city and special districts such as hospital, junior college or water districts. Each sets its own rate, and the money pays for local services such as schools, roads and police and fire protection.

The value comes from the appraisal district for your county, which appraises property as of January 1 each year and decides exemption applications. If you disagree with your value, or with a denied exemption, you can protest to the appraisal review board, a panel of local citizens, and its decision can be appealed further.

Your bill is based on the value less any exemptions, multiplied by each unit’s rate. The law calls for 2026 tax bills to be mailed by October 1, 2026, or as soon after as practicable, and you generally have until January 31 of the following year to pay; on February 1, penalty and interest begin on most unpaid bills.

If you own the home you live in, the residence homestead exemption takes part of its value out of the tax. For 2026, as for 2025, school districts must exempt $140,000 of a homestead’s appraised value, up from $100,000 before 2025, after Texas voters approved the increase on November 4, 2025. In the Comptroller’s example, a home appraised at $300,000 pays school taxes as if it were worth $160,000.

Homeowners who are 65 or older, or disabled under the Social Security definition, get an additional $60,000 off for school taxes, up from $10,000 before 2025, so $200,000 in all, and the constitution generally keeps the school taxes on that homestead from going up while it stays theirs. Any taxing unit may also offer a local option exemption of up to 20% of the home’s value, but not less than $5,000.

You apply with the appraisal district in the county where the home is, on Form 50-114, generally by April 30 of the year you want the exemption, which for 2027 is April 30, 2027. If you buy after January 1, you may get it for the rest of that year once you qualify, as long as the previous owner did not get the same exemption for that year. The Comptroller says a late application can be filed up to two years after the deadline, and once the exemption is granted you do not reapply each year unless the chief appraiser asks.

Texas taxes businesses through the franchise tax, which the Comptroller describes as a privilege tax on each taxable entity formed or organized in Texas or doing business in Texas. Taxable entities include corporations, S corporations, limited liability companies, including single-member and series LLCs, partnerships and banks, and an LLC formed in another state is covered if it does business in Texas. Sole proprietorships are not, unless the business is a single-member LLC, and neither are general partnerships owned directly and entirely by individuals.

The tax is figured on margin: total revenue less the greatest of cost of goods sold, compensation, 30% of total revenue or $1 million, apportioned to Texas by gross receipts. The rate is 0.75%, or 0.375% for an entity primarily engaged in retail or wholesale trade, and an entity with $20 million or less in total revenue can elect the EZ computation at 0.331% instead.

Most businesses owe nothing. An entity whose annualized total revenue is at or below the no tax due threshold owes no franchise tax, and that threshold is $2.65 million for reports due in 2026 and 2027, up from $2.47 million for 2024 and 2025. Of the millions of businesses in Texas, the Comptroller’s December 2025 field guide says only about 131,000 filers usually owe any franchise tax.

Texans pay federal income tax like everyone else, so the federal return is the one that matters. Whether you have to file it depends on IRS rules, such as your gross income, filing status and age, or your net earnings from self-employment, and living in Texas does not change those tests. The IRS says most U.S. citizens or permanent residents who work in the U.S. have to file.

If you itemize deductions, the IRS lets you deduct state and local general sales taxes instead of state and local income taxes, by checking box 5a on Schedule A and using either what you actually paid or the IRS optional sales tax tables. Unless you paid income tax to another state, that is the option that counts for a Texan, and the property taxes on your home are deductible as well.

Both share one cap on state and local tax deductions. Under the July 2025 tax law (Public Law 119-21), it is $40,400 for 2026, or $20,200 if married filing separately, reduced by 30% of modified adjusted gross income over $505,000 ($252,500 if married filing separately) but not below $10,000 ($5,000). For 2025 returns the cap was $40,000 and the reduction began at $500,000.

Moving to Texas does not settle the year you move. Each state sets its own rules for people who arrive or leave during a year, so the state you left may still expect a return. New York, for example, says you may have to file there as a part-year resident, or as a nonresident with income from New York sources, and your New York domicile does not change until you show clear and convincing evidence that you abandoned it and set up a new one; registering to vote elsewhere is not enough on its own.

Working remotely from Texas does not always end another state’s tax either. New York’s guidance says: “If you are a nonresident whose primary office is in New York State, your days telecommuting are considered days worked in the state unless your employer has established a bona fide employer office at your telecommuting location.” Someone living in another income tax state would usually get a credit at home for that tax; a Texan has no state income tax to take it against, so nothing at home offsets it.

Arriving in Texas has its own steps. In 2026, a new resident who brings a vehicle already registered in their name in another state or country pays a $90 new resident tax instead of the 6.25% use tax, to the county tax assessor-collector, within 30 days. A homeowner applying for the homestead exemption must state that they claim no homestead exemption on another home in or outside Texas. Leaving Texas works the other way: your new state’s rules decide what it taxes for the year you arrive.