Texas does not have a state income tax on wages, retirement income, or most other personal earnings

Texas is one of nine states with no personal income tax. You will not owe state income tax on wages, salaries, tips, Social Security, pensions, or investment dividends. This applies whether you work in Texas, live in Texas, or both.

Texas does collect other taxes — property tax, sales tax, and business taxes — but not a tax on individual income. If you moved to Texas from a state with income tax, or you work remotely for an out-of-state employer, you still owe no Texas state income tax on that income.

Key Takeaways

  • Texas has no state income tax on wages, retirement income, investment earnings, or Social Security benefits.
  • You will still pay federal income tax to the IRS, even though Texas collects no state tax.
  • Texas funds state services through property tax, sales tax, and business taxes instead.
  • If you moved to Texas from another state, you may still owe that state's income tax on income earned while you lived there.

What taxes Texas does collect

Without income tax, Texas relies on other revenue sources. Sales tax is the largest: the state rate is 6.25 percent, and local jurisdictions add between 0.5 and 2 percent on top, making total sales tax range from 6.25 to 8.25 percent depending on where you shop.

Property tax funds schools and local government. Texas has no state property tax, but counties and school districts set their own rates. The statewide average is around 0.8 percent of home value per year, though this varies significantly by county.

Texas also collects business taxes, including the franchise tax on corporations and certain partnerships, and taxes on oil and gas production. These do not apply to individual workers.

Federal income tax still applies

No state income tax does not mean no income tax at all. You still file a federal tax return with the IRS and pay federal income tax based on your income, filing status, and deductions. The IRS tax rates and deadlines apply to all Americans, regardless of where they live.

When you file your federal return, you will not see a line for Texas state tax. Your W-2 form from your employer will show federal tax withheld but no state tax withheld, because Texas collects none.

If you moved to Texas from another state

Moving to Texas does not erase tax obligations from your previous state. If you worked in a state with income tax before moving, you owe that state tax on income you earned while you lived there. You may need to file a part-year return in your former state.

The timing matters: you owe tax to the state where you earned the income, based on when you earned it. If you worked in California for six months and then moved to Texas, you owe California tax on those six months of income. Texas tax applies only to income earned after you established Texas residency.

Some states have reciprocal agreements that reduce or eliminate tax on wages earned in a neighboring state, but this depends on the specific states involved. Check your former state's tax authority website or speak with a tax preparer if you are unsure.

Remote work and out-of-state employers

If you live in Texas and work remotely for an out-of-state company, you owe no Texas state income tax. Texas does not tax income based on where your employer is located — only on where you live and work.

However, you may owe income tax to the state where your employer is based, depending on that state's rules. Some states tax only income earned within their borders; others tax employees who work remotely for in-state companies even if they live elsewhere. This varies widely, so check with your employer's payroll department or a tax preparer if you are unsure.

Self-employment and business income

If you are self-employed or own a business in Texas, you owe no Texas state income tax on your business earnings. You will still owe federal self-employment tax and federal income tax on your net profit, but Texas collects nothing.

You may owe the Texas franchise tax if your business structure and revenue meet certain thresholds. Most sole proprietorships and small partnerships do not owe it, but corporations and larger partnerships often do. Check the Texas Comptroller of Public Accounts website or speak with an accountant to determine whether your business owes franchise tax.

Frequently Asked Questions

Do I still file a tax return if I live in Texas?

You file a federal return with the IRS if your income exceeds the filing threshold for your age and filing status. You do not file a state return in Texas because there is no state income tax. Federal filing requirements are the same whether you live in Texas or any other state.

What if I work in another state but live in Texas?

You owe no Texas state income tax. You may owe income tax to the state where you work, depending on that state's rules. Some states tax only income earned within their borders; others do not. Check the tax authority in the state where you work.

Does Texas tax retirement income or Social Security?

No. Texas has no state income tax on Social Security, pensions, 401(k) withdrawals, IRA distributions, or any other retirement income. You will owe federal tax on most retirement income, but not Texas state tax.

If I move out of Texas, do I owe back taxes?

No. You owed no Texas state income tax while you lived there, so there is nothing to owe when you leave. However, you will owe income tax to your new state starting from the date you establish residency there.

Are there any deductions or credits that reduce Texas income tax?

There is no Texas state income tax to reduce. Any deductions or credits you use apply only to your federal return. Texas offers property tax exemptions for certain groups like seniors and disabled homeowners, but these are separate from income tax.