What income is taxed in Texas

Texas does not impose a state income tax, so retirement income — including pensions, IRAs, 401(k)s, and other retirement plans — is not taxed.

To assess whether you’re saving enough for retirement and to plan accordingly, consider using the AARP Retirement Calculator.

No. Texas does not tax income from investments at the state level.

Texas does not tax Social Security benefits. However, you may owe federal taxes depending on your provisional income, which includes:

Federal Tax on Social Security:

Up to 50% of benefits may be taxable if:
- You earn $25,001–$34,000 (single filer)
- You earn $32,001–$44,000 (joint filer)
Up to 85% of benefits may be taxable if:
- You earn over $34,000 (single)
- You earn over $44,000 (joint)

Use AARP’s Social Security Calculator to find the best time to claim and how to optimize your benefits.

Texas has an average property tax rate of 1.47% of your home’s assessed value, ranking it 7th highest nationwide.

Variations by County:

Taxes are calculated based on:

Texas taxes personal property only if it is used to generate income (e.g., a work vehicle).

Learn more about property taxes and exemptions on the Texas Comptroller’s website.

Sales Tax: 6.25% statewide base rate. Local jurisdictions can add up to 2%, with the average total rate being 8.2%.
Exempt Items: Most groceries (e.g., milk, bread, eggs) are not taxed. Feminine hygiene products and adult diapers are also exempt.
Gas/Diesel: 20¢ per gallon. No added sales tax.
Alcohol:
- Subject to both state and local sales taxes
- Excise taxes: $2.40/gallon for liquor, 20–52¢/gallon for wine, 19¢/gallon for beer
- Mixed beverage gross receipts tax: 6.7%
- Mixed beverage sales tax: 8.25%
Hotels: 6% tax on stays over $15/day, plus potential local taxes.
Lottery Winnings: No state tax, but federal income tax applies.

Texas does not impose an inheritance or estate tax.

Seniors in Texas may qualify for the following property tax benefits:

Homestead Exemption: $100,000 for school district taxes on your primary residence.
Additional Exemption: $10,000 for those aged 65+ or with disabilities.
Tax Freeze: School district taxes are capped starting the year you turn 65.
Veterans’ Exemption: $5,000 to $12,000 based on disability rating. Veterans 65+ may qualify for a $12,000 exemption under certain conditions.
Tax Deferral: Homeowners 65+ or with disabilities can defer property tax payments until they no longer own or occupy the home. Accrued taxes and interest must be repaid later.

Visit the Texas Comptroller’s site for full exemption details.

Military pay and benefits are not taxed in Texas due to the absence of a state income tax.

State Taxes: No filing required in Texas.
Federal Taxes: Returns are due Monday, April 15, 2025.
Use AARP’s 1040 Tax Calculator to estimate your federal tax liability.

Catoegories