Does Texas have state income tax? (2026 guide)
Texas has no state income tax; the rate is 0% across all income levels, and it's constitutionally protected. But Texas is not a zero-tax state. Here's what Texans actually pay, what's never taxed, and what the no-income-tax status means if you establish Texas domicile as an expat or nomad.
No. Texas does not have a state income tax. The Texas income tax rate is 0% for 2026, across every income level, every filing status, and every type of individual income.
This is not a temporary policy or a legislative choice that could change with the next election. The no-income-tax status is embedded in the Texas Constitution and has been since 1993. Any future state income tax would require approval by Texas voters through a statewide referendum, making it one of the country's most durable tax commitments.
This guide covers what taxes Texas residents do pay, what the state does not tax, and what the no-income-tax status means for expats and nomads who establish domicile in Texas.
Texas does not impose a state income tax. The Texas income tax rate is 0% across all income levels and filing statuses for 2026. This policy is protected by the Texas Constitution and any future income tax would require a statewide voter referendum. Texas is one of nine US states with no broad-based state income tax. Texas residents pay only federal income tax and FICA on wages. Texas does not tax capital gains, Social Security, pension distributions, or retirement account withdrawals at the state level. Texas does levy a statewide sales tax of 6.25% plus up to 2% local, and property taxes at an effective average rate of approximately 1.6%. The overall Texas tax burden is approximately 7.6% of personal income, below the national average of 10.2%. For expats and nomads who establish Texas domicile and do not own Texas property, the no-income-tax benefit is essentially unqualified.
Does Texas have state income tax?
No, and the answer is more durable than in most states.
Texas does not impose an individual state income tax for the 2026 tax year. Texas has a 0% state income tax rate at every income level. There are no income brackets, phase-outs, or thresholds above which income becomes taxable. A person earning $30,000 in Texas pays the same amount of state income tax as someone earning $3,000,000: zero.
The Texas Constitution prohibits a state income tax without voter approval, and the prohibition has been in place since 1993. The state legislature cannot introduce an income tax on its own. It would require a constitutional amendment passed by a two-thirds majority of both chambers and then ratified by Texas voters in a statewide referendum. This makes the no-income-tax status significantly more durable than in states where the policy is simply a legislative choice.
Texas is one of nine US states with no broad-based state income tax. The full list is Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Two carry narrow qualifications: New Hampshire fully phased out its tax on interest and dividends by 2025, and Washington has taxed capital gains above $262,000 on certain investment types since 2022. Texas has no such exceptions. Texas has no such exceptions.
Because Texas has no income tax, you don't file a Texas state income tax return. Texas residents file only their federal Form 1040 each year. No state return, no state filing deadline, no state tax payment.
For a broader overview of what Texas residency involves and why nomads and expats choose it, Texas Residency: Benefits and Requirements guide covers the full picture including domicile steps and practical considerations. If you are comparing Texas against other no-income-tax states for domicile purposes, best and worst domicile states for nomads and expats article maps out the key differences.
What taxes do Texas residents actually pay?
Texas is not a zero-tax state. It taxes consumption and property rather than income. Understanding what Texas does tax is as important as knowing what it does not.
Sales tax
Texas imposes a statewide sales tax of 6.25% on most retail sales, leases, and services. Local jurisdictions including cities, counties, transit authorities, and special districts may add up to 2%, bringing the maximum combined rate to 8.25%. The average combined rate across Texas is approximately 8.19% when local rates are weighted.
Notable exemptions from Texas sales tax include most groceries and prescription drugs. Most goods and services are taxable at the point of sale.
For expats and nomads who spend limited time in Texas, the sales tax impact is proportional to spending. Someone who visits Texas for two weeks per year to handle DPS appointments and other administrative tasks pays sales tax only on what they purchase during those visits.
Property tax
Texas does not impose a statewide property tax. Counties and local governments levy and collect property taxes. The effective statewide average property tax rate is approximately 1.6% of assessed value according to Tax Foundation data, placing Texas among the higher property tax states in the US.
The property tax situation for nomads and expats is straightforward: if you do not own Texas real estate, you pay no Texas property tax. Renters pay property tax indirectly through rent, but there is no direct obligation without property ownership. For the typical SavvyNomad reader using a Texas mail forwarding address without owning Texas property, the high property tax rate is irrelevant. The no-income-tax benefit is clean and unqualified for this group.
Texas has significantly increased the homestead exemption for owner-occupied residential property in recent years. Homeowners with a Texas primary residence benefit from meaningful reductions in their effective property tax burden.
Business franchise tax
Texas imposes a franchise tax on businesses with annual revenue above approximately $2.47 million (2026, verify with the Texas Comptroller before publishing). Rates are 0.375% for most businesses qualifying for the lower rate and 0.75% for all others. This is a business-level tax, not a personal income tax. Individual wage earners are not affected. Sole proprietors and small businesses below the threshold owe nothing. If you own a business entity in Texas, verify with a Texas CPA whether your structure and revenue trigger the franchise tax.
Overall tax burden
The overall Texas tax burden is approximately 7.6% of personal income according to available data, meaningfully below the national average of approximately 10.2%. The state funds a $338 billion biennial budget largely through sales taxes and property taxes, without relying on personal income tax revenue.
For context on how high-tax states compare and why so many people are leaving them, stickiest states for US citizens ranked guide covers which states are hardest to leave and why Texas is often the destination.
What Texas does not tax
Texas does not tax any of the following at the state level:
- Wages and salaries: 0% state income tax regardless of income level or source
- Capital gains: no state capital gains tax; prohibited by the Texas Constitution
- Social Security benefits: not taxed by Texas, though federal tax may still apply
- Pension distributions: not taxed by Texas regardless of amount
- IRA and 401(k) withdrawals: not taxed by Texas
- Investment income including dividends and interest: not taxed by Texas
- Self-employment income: not taxed by Texas at the state level; federal self-employment tax applies normally
- Inheritances: Texas has no inheritance tax
- Estates: Texas has no estate tax
Federal tax obligations apply normally to all Texas residents. Establishing Texas domicile eliminates state income tax. It does not reduce federal income tax, Social Security tax, Medicare tax, or any other federal obligation. Those remain identical regardless of which state you live in.
What this saves compared to high-tax states
Based on available research, the income tax savings from Texas domicile compared to California are approximately:
- $100,000 income: approximately $4,241 per year
- $150,000 income: approximately $8,891 per year
- $250,000 income: approximately $18,191 per year
These figures reflect the income tax differential only and do not account for property tax or cost-of-living differences. Verify with a CPA for your specific situation.
If you moved from a high-tax state to Texas during the year, do I have to file taxes in two states if I moved? guide explains how to handle the part-year return for the year of departure. For the broader question of which no-income-tax state to choose as a domicile, how to select the state of domicile blog post walks through the key factors.
What this means for expats and nomads
For expats and nomads who establish Texas as their domicile state, the no-income-tax status means they pay zero state income tax on their worldwide income. This includes foreign-earned income, investment income, and any US-source income, as long as Texas remains their legal domicile.
The property tax is irrelevant for most expats who do not own Texas real estate. An expat living in Portugal or Thailand with a Texas domicile and a Texas mail-forwarding address pays no Texas income tax and no Texas property tax. The financial benefit is clean.
Contrast this with remaining domiciled in a high-tax state after moving abroad. California, New York, and other states with aggressive residency rules may continue taxing worldwide income even after the taxpayer has physically departed. An expat still legally domiciled in California because they never formally changed their domicile owes California income tax at rates up to 13.3% on worldwide income regardless of where they live. Establishing Texas domicile before or shortly after moving abroad replaces that obligation with a 0% state income tax rate, permanently, as long as the person maintains Texas domicile.
The core steps to establish Texas domicile are obtaining a Texas driver's license, registering to vote in Texas, updating all financial and government records to a Texas address, and filing a final part-year return in any former high-tax state for the year of departure. Read Texas Residency: Benefits and Requirements article that covers the full process in detail. For the driver's licence step, nomads who cannot produce two standard proof-of-residency documents in their own name use the Texas Residency Affidavit. Once the driver's license question is settled, What Is a Texas Real ID? guide explains whether the Real ID-compliant version is worth getting.
For expats evaluating Texas against Florida, Florida residency requirements for tax purposes article covers what Florida's process looks like by comparison.
Texas vs Florida: the two most popular no-income-tax domicile states
Texas and Florida are the two most popular no-income-tax domicile states for expats and nomads. Both have a 0% state income tax rate. Neither has an estate tax or an inheritance tax. From a pure income-tax perspective, the financial benefit of domicile in either state is equivalent. The differences are practical, not financial.
- Property tax: Texas has a higher effective property tax rate (approximately 1.6%) than Florida (approximately 0.86%). For expats who do not own property in either state, this difference is irrelevant.
- Driver's license process: Florida's driver's license process for people without a permanent address is generally more straightforward for expats. It does not require a third-party certifier the way Texas does through the DL-5 affidavit. In Florida, a mail forwarding address combined with supporting documentation is typically sufficient. In Texas, the DL-5 requires coordinating with a family member, a non-family certifier who attends DPS in person, or an organizational representative with a notarised letter.
- Domicile mechanism: Florida uses a formal Declaration of Domicile filed with the county clerk, a single dated public document that clearly establishes the domicile claim. Texas relies on the totality of facts including driver's licence, voter registration, and address records, without an equivalent standalone declaration.
- Business taxes: Texas has a franchise tax for business entities above the revenue threshold. Florida has a 5.5% corporate income tax but no franchise tax on pass-through businesses. The impact depends on your business structure.
Texas is the better choice when you have family or existing connections in the state, when your employer or business is Texas-based, or when you have a DL-5 certifier readily available. Florida is often the simpler path for expats with no existing Texas connections because the driver's license and Declaration of Domicile process requires less coordination.
| Texas | Florida | |
|---|---|---|
| State Income Tax | 0% | 0% |
| Capital Gains Tax | None | None |
| Estate Tax | None | None |
| Inheritance Tax | None | None |
|
Property Tax Effective average |
~1.6% | ~0.86% |
|
Sales Tax Max combined |
8.25% | 7.5% |
| Business Tax | Franchise tax above ~$2.47M revenue | Corporate income tax 5.5% (pass-throughs exempt) |
| Domicile Mechanism | Totality of facts — driver's licence, voter registration, records | Declaration of Domicile — single notarised public document |
| Driver's Licence for Expats | DL-5 affidavit required if no standard documents | Mail forwarding address accepted with supporting documents |
| In-Person Requirement | DPS appointment; non-family certifier must attend | One DMV visit — no third-party certifier needed |
| Best For | Expats with existing Texas connections or family | Expats with no existing local connections |
Best and worst domicile states for nomads and expats blog post compares the full range of no-income-tax options with the key practical factors for each. Florida residency requirements for tax purposes article covers the Florida process specifically. If you are still deciding, how to select the state of domicile guide walks through how to evaluate options based on your specific situation.
Frequently asked questions
Does Texas tax remote workers?
No. Texas does not impose state income tax on wages, including wages earned by remote workers living or working in Texas. Remote workers pay only federal income tax and FICA. One important caveat: if you work remotely for an employer based in a "convenience of employer" state such as New York, New Jersey, Connecticut, Pennsylvania, or Nebraska, that state may still tax your wages even if you live and work in Texas. Texas domicile does not override another state's sourcing rules for employer-state income.
Does Texas tax capital gains?
No. Texas does not tax capital gains at the state level. The Texas Constitution prohibits a state income tax, which includes capital gains of all types. Federal capital gains tax applies normally to Texas residents.
Do expats living abroad still benefit from Texas domicile?
Yes. An expat with Texas domicile pays 0% state income tax on worldwide income regardless of where they physically live. The benefit is maintained as long as Texas remains their legal domicile, which requires keeping the driver's licence, voter registration, and all financial and government records consistently pointing to Texas.
Does Texas have estate or inheritance tax?
No. Texas has neither an estate tax nor an inheritance tax. Assets passing to heirs in Texas are subject to federal estate tax rules only, with the 2026 federal exemption at $15 million per person.
What is the Texas franchise tax and does it affect me personally?
The Texas franchise tax is a business-level tax on entities with annual revenue above approximately $2.47 million (2026). It does not apply to personal income or to individuals as wage earners. If you own a business entity formed or operating in Texas, check with a Texas CPA whether your entity structure and revenue level trigger the franchise tax.
What is the total tax burden in Texas?
Approximately 7.6% of personal income according to available data, below the national average of approximately 10.2%. Texas is not a zero-tax state. It funds government through sales taxes, property taxes, severance taxes on natural resources, and the business franchise tax. For high earners and renters who do not own Texas property, the overall tax burden is materially lower than in most other states.
Conclusion
Texas has no state income tax. The rate is 0%, it covers all individual income types including capital gains and retirement distributions, and it is constitutionally protected against legislative change. Texas residents file no state income tax return and pay no state tax on wages, investments, or retirement income.
Texas does tax consumption through sales tax and property through local property taxes. For expats and nomads who establish Texas domicile without owning Texas real estate, those taxes create minimal or no direct obligation.
The result is a clean, permanent 0% state income tax rate on worldwide income, replacing whatever the former high-tax state was claiming, for as long as Texas domicile is maintained.
