Texas · the basics

No income tax in Texas: what the constitution forbids, and what the state takes instead

Texas has never taxed a paycheck, a pension or a capital gain, and since 2019 its constitution says the legislature may not start. What a Texan pays instead is the property tax bill in October and the 8.25% at the register, and both of them reach the federal return. What “no income tax” changes on Form 1040, what it costs a household anyway, and the two Texas filings a family can still miss.

By Charles Trautman, EA, editor

Need to Know Tax · written from Texas Comptroller of Public Accounts sources, November 3, 2026; updated November 12, 2026 after the election · not yet reviewed by a Texas practitioner

After the November 3, 2026 election. No statewide tax proposition on the ballot. No income tax; the Legislature next meets in January 2027. Texas in 2027 and beyond →

The bottom line

Texas has no income tax, and the constitution bars one.
The federal return is the whole income tax calendar: Form 1040 is due Thursday, April 15, 2027.
Property tax is the tax that matters. The school homestead exemption is $140,000, with a further $60,000 for owners 65 or older or disabled.
Property tax and the sales tax election are deductible on the federal return inside the $40,400 cap for 2026.
The 20% cap on appraisal increases for non-homestead property expires December 31, 2026 unless the 2027 Legislature extends it.
No statewide tax proposition was on the November 3 ballot.

A Texas resident files one income tax return, the federal one. There is no state return, no state withholding on the W-2, no state estimate in April, June, September and January, and no state refund to wait for. Article VIII, Section 24-a of the Texas Constitution, approved by voters on November 5, 2019, says the legislature “may not impose a tax on the net incomes of individuals,” and on November 4, 2025 voters added three more bans: no state tax on capital gains, realized or unrealized (Section 24-b); no estate, inheritance or gift tax (Section 26); and no tax on securities transactions (Section 30). Wages, Social Security, IRA withdrawals, the gain on a house, a lottery ticket and an inheritance all go on the 1040 and stop there.

The other half of the sentence is that Texas is not a low-tax state so much as a differently taxed one. The state and its 254 counties, roughly 1,000 school districts and thousands of cities and special districts are paid for by a property tax that is among the heaviest in the country and a sales tax that runs 8.25% in most cities. Total property tax levies in Texas were about $89.5 billion in 2025 (verify). A household that has never seen a state income tax form has paid the state every time it bought a sofa and every January when the property tax came due. The rest of this article is about where that shows up on the federal return, and where it does not.

What the federal return looks like without a state tax

Only one line on Form 1040 cares which state you live in: the state and local tax deduction on Schedule A, line 5. An itemizer deducts either state and local income taxes or state and local general sales taxes, never both, plus property taxes, up to the cap. For a resident of Oklahoma or Colorado the income tax is usually the biggest piece. A Texan has none, so the SALT line is rebuilt from two things: property tax on the home and any other real estate, and the sales tax election on line 5a. The box for sales tax has to be checked. Software that carries a prior state’s habits forward sometimes leaves it unchecked and deducts nothing for the year.

The cap matters more in Texas than in most places. For 2026 the SALT deduction is limited to $40,400 on a joint or single return, $20,200 married filing separately, and it phases back toward $10,000 once modified adjusted gross income passes $505,000. In an income-tax state the cap is mostly consumed by income tax. In Texas it is all available for property tax and sales tax, and a homeowner in Austin or Frisco with $12,000 of property tax and a car purchase will use a good part of it. Whether itemizing beats the standard deduction, $16,100 single and $32,200 joint for 2026, is a separate question, and for a household without a mortgage the answer is usually no.

Everything else on the federal return is the same for a Texan and a Minnesotan. The senior deduction, the tip and overtime deductions, the child tax credit, the taxation of Social Security, the capital gains brackets, IRMAA: none of them know Texas has no income tax. The common misreading is that moving to Texas lowers the federal tax. It does not. It removes the state tax, which for someone leaving a 5% to 10% state is real money, but the federal bill on the same income is unchanged.

Where a state income tax would have shown up, and what Texas puts there instead
On the federal return	In an income-tax state	In Texas
Schedule A, line 5a	State income tax withheld and paid	Sales tax, by the IRS tables or receipts, if the box is checked
Schedule A, line 5b	Property tax	Property tax, usually the larger piece
W-2 boxes 15 to 17	State wages and withholding	Blank, or another state if the employer is elsewhere
1099-R state boxes	State withholding on pensions and IRAs	Blank; ask the payer to stop any old-state withholding
Schedule 1, line 1	Last year’s state refund, taxable if it was deducted	Nothing; there is no refund
Estimated payments	Federal and state vouchers	Federal only
Deduction for a new car	Income tax usually elected, so the car’s sales tax is not deducted	6.25% motor vehicle tax added to the sales tax election

Property tax: the Texas income tax

There is no state property tax. The county appraisal district sets the market value of every parcel as of January 1; the school district, county, city, community college and special districts each set a rate in August or September; the county tax assessor-collector mails one bill in October, due by January 31 and delinquent February 1. Rates are stated per $100 of value, and combined rates in the big metropolitan counties commonly run $1.60 to $2.20 per $100, that is 1.6% to 2.2% of market value before exemptions (verify), with the school district usually the largest single piece. On a $400,000 house that is $6,400 to $8,800 a year before any relief. After exemptions the picture softens: the Census-based effective rate on owner-occupied Texas homes is about 1.25%, and the median bill about $4,100 (verify), which is still ninth highest in the country (verify).

Almost all of the relief is on the homestead, and all of it must be applied for at the appraisal district on Form 50-114. The school district exemption is $140,000 of appraised value, raised from $100,000 by SB 4 and Proposition 13 in November 2025 and applied from the 2025 tax year. A homeowner 65 or older or disabled gets $60,000 more, raised from $10,000 by SB 23 and Proposition 11, plus a ceiling that freezes the school tax at the first qualifying year’s amount. Every homestead also gets the 10% cap: the appraised value for tax purposes may rise no more than 10% a year plus new improvements, whatever the market does. The whole subject, including the deadline and the driver license rule, is in Homestead and property-tax relief in Texas.

For the federal return, the deduction is for what was actually paid in the calendar year. A 2026 bill paid in December 2026 is a 2026 deduction; the same bill paid in January 2027 is a 2027 deduction. Lenders paying through escrow usually pay in December. A homeowner who pays directly can choose the year, which matters in a year when the household is close to the line between itemizing and the standard deduction.

Sales tax: 6.25% plus up to 2%

The state rate is 6.25% on retail sales, leases and rentals of most goods and on a list of taxable services. Cities, counties, transit authorities and special-purpose districts may add up to 2% combined, for a maximum of 8.25%, which is the rate in Houston, Dallas, San Antonio, Austin and most other cities. Groceries, prescription drugs and most residential utilities are exempt. Three sales tax holidays recur each year: emergency preparation supplies in late April, Energy Star and water-efficient products over Memorial Day weekend, and the back-to-school weekend in August, which in 2026 ran August 7 to 9 for clothing, footwear, school supplies and backpacks priced under $100.

Motor vehicles are taxed separately at 6.25% of the price less any trade-in, paid to the county tax office when the vehicle is titled, within 30 days of a private sale. A new resident bringing a car already registered in their name elsewhere pays a flat $90 new resident tax instead of the 6.25% use tax. A gift between family members is $10.

On the federal return, the sales tax is what a Texan who itemizes deducts in place of state income tax. The IRS optional tables estimate it from income, household size and the combined local rate; the actual tax on a motor vehicle, boat, aircraft or home building materials is added on top. Keep the bill of sale for a car. It is the one sales tax receipt worth saving.

Worked example: one year of Texas taxes for a working family

Married, two children, $150,000 of wages. They own a $400,000 house with the general homestead exemption in a district where the school district levies $1.00 per $100 and the county, city and other units together levy $0.90 per $100 (verify; rates are illustrative). They spend $45,000 on taxable goods in a city at 8.25% and buy a $40,000 car. Mortgage interest $20,800, charitable gifts $2,000.

School district tax: ($400,000 − $140,000) × 1.00%	$2,600
County, city and other units: $400,000 × 0.90%, no local optional exemption assumed	$3,600
Sales tax on $45,000 of purchases at 8.25%	$3,713
Motor vehicle sales tax: 6.25% of $40,000	$2,500
Texas taxes for the year	$12,413
What a 5% flat income tax on the same wages would have been, for comparison	$7,500
Deductible on Schedule A: property tax $6,200, IRS table sales tax about $1,500 (verify with the calculator), car tax $2,500	$10,200
Itemized total with interest and gifts, against a $32,200 standard deduction	$33,000

This family itemizes, barely, and only because of the mortgage. Without it they take the standard deduction and the $12,413 of Texas taxes buys them nothing on the federal return. The point of the table is the first total: a family with no state income tax paid the state more than a 5% income tax would have cost. Where Texas wins is for a renter with modest spending, or a retiree on a frozen school tax, which is the next article.

The filings a Texan can still miss

No income tax means no income tax return, extension, estimate or refund for an individual. It does not mean the Texas Comptroller of Public Accounts never hears from a Texan. The Comptroller administers the sales tax, the franchise tax on business entities and the motor vehicle tax, and sets the rules the county appraisal districts follow on property tax. Three of those reach ordinary households.

The homestead application. Form 50-114, filed once with the county appraisal district, free, due April 30 of the first year, with late applications accepted up to two years after the February 1 delinquency date. Not a return, but the most valuable piece of Texas paperwork a homeowner has. Paid “filing services” mail new homeowners offers to file it for $50 or more; the appraisal district does it for nothing.
The franchise tax report. Any LLC, corporation or limited partnership formed or doing business in Texas owes the Comptroller an annual franchise tax report by May 15, even a single-member LLC that a sole proprietor set up for liability protection and that files no separate federal return. The tax itself is zero below $2,650,000 of annualized revenue for the 2026 and 2027 reports, but the entity must still file a Public Information Report or Ownership Information Report, and the Comptroller charges $50 for each late report and can forfeit the entity’s right to do business. A sole proprietorship with no entity owes nothing and files nothing.
Sales tax for a side business. A Texan who sells goods to Texas buyers, at craft fairs or through their own website, needs a sales tax permit and collects 6.25% plus the local rate. A marketplace such as Etsy or Amazon collects for its sellers; a seller taking payments directly does not have that cover.

Then there is the use tax, owed at 6.25% plus local on goods bought out of state or online without Texas tax, enforced mostly on vehicles, boats and aircraft brought into the state. And a Texan who works across the state line in Oklahoma, Louisiana, New Mexico or Arkansas, or gambles there, owes that state’s nonresident income tax on the income earned there and has no home-state credit to absorb it, because there is no home-state tax. That subject is in Moving to Texas.

Behind the scenes: how the ban got into the constitution

Texas never had an individual income tax, but until 1993 nothing stopped the legislature from passing one. In 1991 Lieutenant Governor Bob Bullock floated the idea to pay for school finance reform and was nearly run out of politics; in 1993 he sponsored the amendment that became Section 24, which let the legislature enact an income tax only if voters approved it in a statewide referendum and required that two-thirds of the proceeds go to cut school property taxes (verify). For 26 years that was the rule. In 2019 the legislature sent voters Proposition 4, which replaced the referendum requirement with the flat prohibition now in Section 24-a; it passed with about 74% (verify).

The 2025 amendments extended the idea. Washington State’s 7% capital gains tax, upheld by its supreme court in 2023, and the federal debate over taxing unrealized gains were the stated reasons for Section 24-b, which bars a tax on the gains of an individual, family, estate or trust but carves out property, sales and use taxes. Section 26 bars any death or transfer tax; Texas’s old inheritance tax had collected nothing since the federal state death tax credit expired in 2005 and was repealed outright in 2015 (verify). The practical effect of all three is that the Texas tax system is now locked into property and sales tax by the constitution itself, which is why the fights over property tax relief in Austin are fights over how much state sales tax revenue to send to school districts, not over whether to tax something else.

What to bring

The property tax bill or receipt for every Texas parcel, showing the date paid; the January 1 appraisal notice if the homestead is new
The bill of sale for any car, boat or trailer bought in 2026, showing the 6.25% motor vehicle tax
Your city and county, for the local rate in the IRS sales tax table
Form 1098 from the lender, which may show property tax paid through escrow
If you own an LLC or corporation: the Texas taxpayer number and confirmation the May 15 franchise report was filed
If you work or gamble in another state: the W-2 or W-2G with that state’s withholding
If you moved to Texas in 2026: the date, and the old state’s W-2 and 1099 state boxes for its part-year return

Questions people ask

Is Texas really a low-tax state?

For income, yes: zero, and the constitution keeps it there. For the whole picture it depends on what you own. A renter who spends modestly pays very little. A new buyer of a $600,000 house in Collin or Travis County pays a property tax that would be a respectable income tax somewhere else. A retiree with a frozen school tax and the $200,000 of school exemptions is in between.

Do I file anything with Texas at all?

Not for income. The homestead application goes to the county appraisal district once. If you own an LLC or corporation, the franchise tax report goes to the Comptroller every May 15 even when no tax is due. If you sell goods, a sales tax permit and returns. Otherwise the federal return is the whole job.

Can Texas ever pass an income tax?

Only by amending the constitution, which takes two-thirds of each house of the legislature and a majority of voters. Since 2025 the same is true of a capital gains tax and an estate or inheritance tax.

My W-2 shows Oklahoma withholding. I live in Texas.

You worked there, or your employer thinks you did. Oklahoma taxes nonresidents on wages earned in Oklahoma, and you file an Oklahoma nonresident return to settle up. Texas gives no credit because Texas charges nothing. If you never set foot in Oklahoma, get the employer to correct the W-2 and file for a refund.

Should I check the sales tax box on Schedule A?

If you itemize, always. There is nothing to compare it against. Use the IRS calculator with your combined local rate, usually 8.25%, and add the actual tax on any vehicle bought during the year.

I bought a car in Louisiana and brought it home. Do I owe Texas anything?

Use tax at 6.25%, less credit for the sales tax paid to Louisiana, when you title the car at the county tax office within 30 days. If the car was already registered in your name before you moved to Texas, the $90 new resident tax applies instead.

Texas taxes are real; they are collected without a return

File the homestead application once, check the sales tax box on Schedule A, keep the car’s bill of sale, and if you own an LLC put May 15 on the calendar.

Written by Charles Trautman, EA, editor  ·  Need to Know Tax, Lone Tree, Colorado
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Updated November 12, 2026, after the November 3 election · tax year 2026 figures · awaiting review by a Texas practitioner