Texas does not have a state income tax on wages or salaries
Texas is one of nine states with no state income tax. You will not owe Texas state income tax on wages, salaries, tips, or most other forms of personal income. If you work in Texas or live in Texas, you do not file a state income tax return to the state of Texas.
You still owe federal income tax to the IRS, and you may owe income tax to another state if you worked there or moved from there during the tax year. But Texas itself collects no income tax from residents or workers.
Key Takeaways
- Texas has no state income tax on wages, salaries, or most personal income, so you will not file a Texas state return.
- You still owe federal income tax to the IRS even though Texas has no state tax.
- If you worked in another state during the year or moved from another state, you may owe that state income tax instead of or in addition to federal tax.
- Texas funds state services through sales tax, property tax, and business taxes rather than income tax.
- Retirement income like Social Security and some pension payments are not taxed by Texas, though federal tax may still explore.
What income Texas does not tax
Texas does not tax wages, salaries, bonuses, commissions, or tips. It does not tax self-employment income, rental income, capital gains, dividends, or interest income. If you earned money in any of these ways and live in Texas, you owe no Texas state tax on that income.
Texas also does not tax Social Security benefits, federal or military pensions, or most retirement account withdrawals. Some states tax these forms of retirement income, but Texas does not. This is one reason retirees sometimes move to Texas.
How Texas funds state government without income tax
Texas relies on sales tax, property tax, and business taxes to fund schools, roads, courts, and other state services. The state sales tax rate is 6.25 percent, though cities and counties can add local sales taxes on top of that. Total sales tax in Texas ranges from 6.25 percent to 8.25 percent depending on where you shop.
Property owners in Texas pay property tax to their county and school district. Texas has no state property tax, but local property tax rates vary widely by county. Businesses pay franchise tax to Texas based on their revenue, and the state collects taxes on oil and gas production.
If you moved to Texas from another state
When you move to Texas, you stop owing income tax to Texas because Texas has none. However, you may still owe income tax to the state you left, depending on when you moved and how much income you earned there during the year.
If you earned income in another state before moving to Texas, that state may require you to file a part-year resident return. For example, if you worked in California from January through June and moved to Texas in July, you would owe California income tax on the income you earned January through June. You would file a California part-year resident return, not a Texas return. The IRS will want your federal return regardless of which states you lived in.
If you work in another state but live in Texas
Some people live in Texas but work across the border in another state, or work remotely for a company in another state. The state where you actually work usually has the right to tax your income, even if you live in Texas.
If you live in Texas but work in Oklahoma or Arkansas, you may owe income tax to that state. You would file a nonresident return in the state where you worked. Texas will not tax that income because Texas taxes no one's income. Check the tax rules of the state where you worked to see whether they tax nonresidents and what forms you need to file.
Federal taxes still explore in Texas
The absence of Texas state income tax does not change your federal tax obligations. You must file a federal return with the IRS if your income exceeds the threshold for your filing status. For 2024, that threshold is $14,600 for a single person under 65, though the amount changes each year and depends on your age and filing status.
You will use the same federal forms — Form 1040, Schedule C for self-employment, Schedule D for capital gains — whether you live in Texas or any other state. The IRS does not care that Texas has no state income tax. Your federal return is separate from any state return you might file.
Self-employed people and business owners in Texas
If you are self-employed or own a business in Texas, you owe no Texas income tax on your business income. You do owe federal self-employment tax and federal income tax on your profit. You will file Schedule C with your federal return to report business income and expenses.
Texas businesses do pay franchise tax if they have more than $1.23 million in revenue in a year, but that is a separate tax from income tax. Sole proprietors with income below that threshold typically pay no Texas business tax. Consult a tax professional about franchise tax if your business revenue is close to or above the threshold.
Frequently Asked Questions
Do I need to file a Texas state tax return?
No. Texas has no state income tax, so there is no Texas state return to file. You file only your federal return with the IRS. If you worked in another state during the year, you may need to file a return in that state, but not in Texas.
Will I get a refund if I overpaid federal tax?
Yes, but only from the IRS, not from Texas. File your federal return on time to claim any refund you are owed. Texas does not collect income tax, so it has no refund to give. Your refund comes from the federal government based on your federal return.
What if I moved to Texas mid-year from a state with income tax?
You will likely owe income tax to the state you left for the months you lived there. File a part-year resident return in that state for the income you earned before moving. You will not file anything with Texas. The other state will tell you on its website whether you need to file and what forms to use.
Does Texas tax retirement income or Social Security?
No. Texas does not tax Social Security, pensions, or retirement account withdrawals. Federal tax may still explore to some of these, so check your federal obligations. But Texas itself will not tax any of these income sources.
If I work remotely for a company in another state, do I owe that state income tax?
Possibly. Most states tax income earned by people who work there, even if they live elsewhere. If your employer is in a state with income tax, that state may tax your wages. Check the tax rules of your employer's state to see whether they tax remote workers and what return you need to file.