Will Texas ever add an income tax?

Extremely unlikely. Texas voters approved a constitutional amendment in 1993 that requires any personal income tax to be approved by voters in a statewide referendum. Texas voters would need to vote yes by a majority to allow it, and then the legislature would still need to implement it. Given Texas political culture, this is considered essentially impossible in the foreseeable future.

Home/Texas

No Income TaxTexas (TX)

Texas Has No Income Tax: The Full 2026 Breakdown

Q: Does Texas have a state income tax?

No. Texas has no state income tax on wages, salary, retirement income, or any personal income. The Texas Constitution (Article VIII, Section 24) prohibits the legislature from enacting a personal income tax without voter approval, and voters have never approved one.

Q: Why is Texas property tax so high?

Texas has no state income tax and no state property tax, but local governments (school districts, counties, cities, and special districts) rely heavily on property taxes to fund services. The average effective rate of 1.60% is the 6th highest in the nation. School district taxes account for the largest share. Texas has a homestead exemption of $100,000 for school district taxes (increased from $40,000 by voters in 2023).

Q: What is the sales tax rate in Texas?

Texas has a 6.25% state sales tax rate. Cities, counties, and special districts can add up to 2% in local taxes, for a maximum combined rate of 8.25%. The average combined rate is approximately 8.19%. Most food items sold for home preparation are exempt from sales tax in Texas.

Q: Does Texas have a franchise tax?

Yes. Texas levies a franchise (margin) tax on businesses with annual revenues above $2.47 million (2024 threshold). The rate is 0.75% of taxable margin for most businesses, 0.375% for retailers and wholesalers. Businesses below the threshold pay $0. This affects C-corps, LLCs, and partnerships but not sole proprietors.

Texas has no state income tax on any personal income, a protection written into the state constitution. But Texas has the 6th highest property tax rate in the nation. Here is the honest total-tax picture.

Last reviewed April 2026. Sources: Texas Comptroller, Tax Foundation, BEA.

Quick Facts: Texas Taxes 2026

Income Tax

Constitutionally banned since 1993

Avg Property Tax

1.60%

$6,400/yr on $400K home

State Sales Tax

6.25%

8.19% combined avg

Estate Tax

None

No inheritance tax either

Social Security

Not taxed

No income tax of any kind

Cost of Living

6% below national average

Median Home

$345K

Varies hugely by metro

Franchise Tax

0.75%

On businesses over $2.47M revenue

The Texas Property Tax Reality

Texas has no state-level income tax and no state-level property tax. Instead, the entire property tax burden falls on local governments: school districts, counties, cities, hospital districts, and junior college districts. These stack up. The result is an average effective rate of 1.60%, the 6th highest in the nation.

On a $400,000 home, that is $6,400 per year. On a $600,000 home in Austin or Dallas, it is $9,600 per year. Compare this to California: 0.71% average effective rate, or $2,840 per year on the same $400K home. The difference of $3,560 per year is real and often exceeds the income tax that a median earner in California would pay.

Property Tax by Major Texas Metro (2024)

Metro Area	Effective Rate	On $400K Home	On $600K Home
Dallas-Fort Worth	1.72%	$6,880	$10,320
Houston	1.82%	$7,280	$10,920
San Antonio	1.83%	$7,320	$10,980
Austin	1.60%	$6,400	$9,600
El Paso	1.50%	$6,000	$9,000
Texas average	1.60%	$6,400	$9,600

The Texas property tax exemption (2023 update)

Texas voters approved a constitutional amendment in November 2023 that increased the school district homestead exemption from $40,000 to $100,000 of assessed value. For a homeowner with a $350,000 home and a combined school district rate of 1.00%, this saves approximately $600 per year. The exemption only applies to primary residences. Seniors age 65+ get an additional $10,000 exemption and a property tax freeze for school district taxes.

Sales Tax in Texas

Texas has a 6.25% state sales tax. Cities, counties, transit authorities, and special purpose districts can each add up to 2% in combined local taxes. The effective average combined rate is 8.19%. Most food for home preparation is exempt from Texas sales tax, as are prescription medications. Restaurant food and prepared foods are taxable.

The Franchise Tax (For Businesses)

Texas levies a franchise (margin) tax on most businesses with total revenue above $2.47 million per year. Rate: 0.75% of taxable margin for most entities; 0.375% for retailers and wholesalers. Sole proprietors filing on personal returns are not subject to the franchise tax. If you run an LLC or corporation in Texas and have significant revenue, you will need to file and potentially pay franchise tax.

Retirement Implications

✓

Social Security: Not taxed

No state income tax means no state tax on Social Security. Federal tax rules still apply.

✓

Pension income: Not taxed

All pension income is state-tax-free in Texas.

✓

401(k) / IRA withdrawals: Not taxed

All retirement account withdrawals are completely exempt from Texas state tax.

✓

Estate tax: None

No state estate or inheritance tax in Texas.

✓

Property tax (senior): Freeze available

Seniors 65+ get the homestead exemption plus their school district property taxes are frozen (cannot increase) for as long as they own the home.

High property tax: Key risk

Retirees on fixed incomes can still struggle with high Texas property tax bills even with exemptions, particularly in high-value metros.

Establishing Residency in Texas

Texas is a popular domicile destination for high earners leaving California and New York. Texas has no Declaration of Domicile form (unlike Florida), but the key steps are:

Obtain a Texas driver's licence (required within 90 days of establishing residency per Texas Transportation Code 521.143).
Register your vehicle in Texas within 30 days of residency.
Register to vote in Texas and cancel your prior state registration.
Spend at least 183 days per year in Texas. Keep detailed records.
File your homestead exemption if you own a primary residence by April 30 of the tax year.
Update all estate documents, financial accounts, and professional registrations to your Texas address.
Sever all meaningful ties with your prior state, especially California or New York, which aggressively audit former residents.

See our full establishing residency checklist for all 9 no-income-tax states.

Who Texas Works Best For

High earners ($200K+)

Excellent

Income tax savings of $15,000 to $30,000+ per year clearly outweigh the higher property tax bill for most high earners, unless they are buying a very expensive home. Best for tech workers in Austin (Amazon, Oracle, Tesla HQ, Dell).

Remote workers

Excellent (check employer state)

Texas domicile is strong for remote workers. If your employer is not in New York, Connecticut, Delaware, Nebraska, or Pennsylvania, you will owe no state income tax on remote earnings.

Average earners ($50-80K)

Mixed

Property tax will likely offset income tax savings for homeowners, especially outside rural areas. Renters benefit more. Cost of living is below national average outside major metros.

Retirees

Good with caution

No retirement income tax is excellent. But property tax on a $500K home is $8,000/yr. The senior property tax freeze helps, but the initial bill is still high. Consider Austin and Dallas alternatives.

Small businesses

Good

No personal income tax on pass-through income. Franchise tax only applies above $2.47M revenue. Strong business-friendly regulatory environment. Second-largest state economy.

Texas Tax FAQ

Does Texas have a state income tax?

No. The Texas Constitution (Article VIII, Section 24) prohibits a personal income tax without voter approval. Voters approved this protection in 1993 and it has never been challenged.

Why is Texas property tax so high?

With no state income tax to fund schools, counties and school districts rely heavily on property taxes. The average effective rate of 1.60% is the 6th highest in the nation. A 2023 constitutional amendment increased the school district homestead exemption to $100,000.

What is the sales tax rate in Texas?

Texas state rate is 6.25%. Local add-ons bring the average combined rate to 8.19%. Most food for home preparation is exempt. Restaurant food is taxable.

Does Texas have a franchise tax?

Yes. Businesses with annual revenue above $2.47 million pay a franchise (margin) tax of 0.75% (0.375% for retailers). Sole proprietors and businesses below the threshold pay $0.

Will Texas ever add a state income tax?

Extremely unlikely. Texas voters approved a constitutional ban on personal income tax in 1993. Adding it would require a voter-approved constitutional amendment, which no Texas politician has seriously proposed.

Compare Texas

Florida vs Texas

Side-by-side total tax breakdown

Texas vs Tennessee

Property tax trap vs sales tax squeeze

Total Tax Burden Guide

All 50 states ranked

Sources: Texas Comptroller of Public Accounts (comptroller.texas.gov), Tax Foundation, BEA Regional Price Parity 2024. Last reviewed April 2026. Not tax advice.