Texas for retirees: nothing on the income, everything on the house

The thing a retiree gains from Texas is easy to state: no state tax on Social Security, pensions, IRA and 401(k) withdrawals, Roth conversions, interest, dividends or capital gains, because Texas has no individual income tax and its constitution forbids one. The federal return does not change its mind about any of that. The IRS taxes a Texas retiree exactly as it taxed the same person in Illinois or California: up to 85% of Social Security by the provisional-income formula, every dollar of the IRA, and IRMAA on the Medicare premium two years later. So the move does not simplify the federal return; it removes the state one. What Texas offers in place of the pension exclusions and senior credits other states put on their returns is a set of property tax breaks that begin the year a homeowner turns 65, and they are worth knowing before the birthday.

Those breaks run through the county appraisal district, not a return. Each must be applied for, each depends on the home being the homestead, and the biggest of them, the school tax ceiling, is set by what happens in the first year of qualifying and can never be undone. A retiree who files the right form at 65 and stays in the house pays roughly the same school tax at 85 that she paid at 65, while the house doubles in value around her.

What stops being taxed

Roth conversions deserve a second look after the move. A conversion in a state with a 5% income tax costs 5% more than the same conversion in Texas. For a retiree who left a taxing state in 2026, the conversions that were put off because of the state tax can now be done at the federal cost alone. The federal cost is what it always was: the converted amount is ordinary income, it can push Social Security into the 85% band, it counts toward the $150,000 joint threshold where the $6,000-per-person senior deduction starts to phase out, and it counts toward the IRMAA brackets two years out. Converting a Texas-sized slice each year, up to the top of the 12% or 22% bracket, is the usual pattern.

The federal return is now the whole return

A Texan files Form 1040 and nothing else. There is no state return to attach, no state estimate, no state refund. For a retiree used to two returns a year, this is the practical change: one set of estimates, one deadline.

The paperwork that follows a retiree does not know about the move. Pension administrators and IRA custodians withhold state tax for the state on file and will keep withholding for Minnesota or Oregon after a move to Georgetown unless told to stop. The fix is a new Form W-4P for periodic pension payments and Form W-4R for one-time withdrawals, with no state election. Old-state tax withheld after the move comes back on the old state’s part-year return, but it is an interest-free loan to that state and a reason to file a return that otherwise might not be needed.

Federal withholding is the other half. With no state tax to pay, some retirees let federal withholding lapse too and are surprised in April. Federal estimated payments are owed when the balance after withholding will exceed $1,000, and the safe harbors, 100% of last year’s tax or 90% of this year’s, 110% of last year’s above $150,000 of AGI, apply in Texas as everywhere. The easiest tool is withholding on an RMD: a December withdrawal with enough federal tax withheld counts as if paid evenly through the year.

The federal items that still bite

Social Security. Texas does not tax it, and neither do most states, so for many movers this is no change. Federally, half of the benefit plus all other income is provisional income; above $32,000 joint ($25,000 single) up to 50% of the benefit is taxable and above $44,000 ($34,000) up to 85%. Those thresholds are not indexed and a couple with a pension and an IRA is almost always in the 85% band. The $6,000 senior deduction for 2025 through 2028 is the federal answer, and it reaches a Texan the same as anyone; there is no state return for it to flow to or fail to reach. See How Social Security is taxed.

IRMAA. Medicare premiums for 2028 will be set from the 2026 return. For 2026 the surcharge begins above $218,000 of modified AGI on a joint return and $109,000 single. A Roth conversion or a large capital gain in the year of the move is the classic cause of a surcharge two years later. The one-time appeal, Form SSA-44, is for a life-changing event such as retirement, not for a conversion. See IRMAA.

The SALT line. A retiree who itemizes deducts property tax plus the sales tax election. For 2026 the cap is $40,400, but the more common Texas outcome for a retiree is that the SALT deduction, with no state income tax in it and the school tax frozen, is too small to beat the standard deduction. For 2026 a couple both over 65 has $32,200 plus $3,300 for age plus the $12,000 senior deduction, $47,500, before itemizing pays. A paid-off house and modest giving do not get there.

What Texas gives at 65

Four things, all through the appraisal district and all keyed to the homestead. The first two arrive the year the homeowner turns 65; the application for the general homestead exemption, Form 50-114, asks for a birth date, and a district that has it grants the age exemption automatically. A homeowner who qualifies by disability, meaning receipt of Social Security disability benefits, gets the same package at any age; a person who is both 65 and disabled gets it once, not twice.

The ceiling is the one that compounds. School district taxes are typically about half the bill in the big metros (verify), and the ceiling takes that half out of the market from the qualifying year on. Over-65 homeowners who qualified before 2025 should have seen their ceilings recalculated downward for the 2025 bill to reflect the larger exemptions (verify with your appraisal district); the first bill to check against is the one that arrived in October 2025.

The deferral, and when to use it

A homeowner 65 or older, disabled, or a disabled veteran may file a Tax Deferral Affidavit, Form 50-126, with the appraisal district and simply stop paying property tax on the homestead. The taxes are not forgiven. They accrue as a lien at 5% simple interest, no penalty, and come due 181 days after the owner no longer owns and occupies the home, which in practice means they are paid from the sale or by the estate. A surviving spouse 55 or older can continue the deferral. The 5% is well under what a reverse mortgage or a home equity line costs, and a retiree whose income does not cover an $8,000 bill is better off deferring than borrowing.

Two cautions. A deferral that violates the deed of trust can give a mortgage lender grounds to call the loan; a homeowner with a mortgage should read the deed of trust or ask the lender first. And the deferral is a lien that will surprise heirs who did not know about it; it belongs in the estate file. For the federal return, deferred property tax is not deducted until it is actually paid, so the deduction, if any, lands in the year of the sale.

The old state cannot follow the pension

Federal law since 1996, 4 U.S.C. §114, bars any state from taxing the retirement income of a person who is no longer its resident, however the pension was earned. A thirty-year California teacher who retires to San Antonio owes California nothing on the CalSTRS pension from the day she stops being a California resident. The same protection covers IRA and 401(k) withdrawals. What the old state keeps is income with a source there: rent from a house kept back home, wages for days worked there, the gain on old-state property sold after the move. And the old state decides whether the person has really left; its residency test, not Texas’s, is what matters. See Moving to Texas.