Texas State Income Tax Overview

Texas is one of a small number of states that does not impose a personal income tax on residents. If you live or work in Texas, you do not file a Texas state income tax return, and there is no Texas equivalent to a Form 1040.

That said, no state income tax does not mean no taxes. Texas funds state and local government through other taxes, including sales taxes, property taxes, and business taxes. Understanding how Texas collects revenue, and how that compares to other states, is important whether you are moving to Texas, already living in the state, or considering relocating elsewhere.

This page explains how Texas's tax system works, what taxes residents do and do not pay, and how Texas compares to other states from a tax perspective.

Does Texas Have a State Income Tax?

No. Texas does not have a state-level personal income tax.

Residents of Texas do not pay state income tax on wages, salaries, self-employment income, retirement income, or investment income. There is also no Texas state income tax return to file and no state income tax withholding taken from paychecks.

This is not a temporary policy or a tax incentive that changes year to year. Texas's lack of a personal income tax is established under state law and has been a defining feature of the state's tax system for decades.

It is important to note that this applies only to state income taxes. Texas residents are still required to file and pay federal income taxes with the IRS, just like residents of every other state.

How Texas Raises Revenue

Texas's lack of a personal income tax does not mean the state operates without revenue. Instead of taxing wages and salaries, Texas relies more heavily on consumption-based taxes, property taxes, and business taxes to fund state and local government.

Understanding this trade-off is important, especially for people moving to Texas from high–income-tax states.

Sales and Use Taxes

Sales and use taxes are a major source of revenue for Texas.

• Texas imposes a statewide sales tax on most goods and some services.
• Local jurisdictions may add additional sales taxes, increasing the total rate in many areas.
• Sales tax applies broadly, meaning residents tend to pay more tax when they spend, rather than when they earn.

For households that spend a large portion of their income, this can offset some of the benefits of having no income tax.

Property Taxes

Property taxes in Texas are imposed at the local level and are a significant source of revenue.

• Rates vary widely by county, city, and school district.
• Property taxes fund local services such as public schools, emergency services, and local infrastructure.
• Property taxes in Texas are often higher than in many income-tax states.

For homeowners, property taxes are often the most significant ongoing tax cost.

Corporate and Business Taxes

While individuals are not subject to state income tax, Texas does collect revenue from businesses.

• Texas does not impose a traditional corporate income tax.
• The Texas franchise tax applies to many businesses operating in the state.
• This tax is based on business activity rather than personal income.

This distinction is important for business owners and entrepreneurs comparing Texas to other low-tax states.

Other State and Local Taxes

Texas also collects revenue through:

• Fuel taxes
• Alcohol and tobacco taxes
• Hotel occupancy and tourism-related taxes
• Various state and local fees and assessments

Population growth and consumer activity play a major role in Texas's revenue structure.

How long do you have to live in Texas to avoid taxes?

Residency for tax purposes is demonstrated by whether or not an individual has taken steps to move into Texas, and, sever residency in a previous state or country. You may still need to file a full-year, part-year, or non-resident income tax return in your current state for the year you move to Texas.

If you are considering moving to Texas, remember that personal income taxes are just part of the overall tax burden. In the state of Texas, however, the overall cost of living is relatively low compared to other high tax states such as California, New Jersey, and New York.

Bottom line: Texas taxes spending, property, and business activity rather than personal income. For many residents, especially high earners, this structure can be advantageous, but it is not tax-free living.

Last updated: January 17, 2026

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