Texas Income Tax Calculator 2026

Why Texas has no income tax

Texas funds state government primarily through sales tax (6.25% state base, up to 8.25% combined with local), property tax administered at the county and ISD level, severance taxes on oil and gas production, and a franchise tax (the 'margin tax') on businesses with revenue above $2.47M. For most W-2 households, the result is a simpler federal-only individual return — no Form 540, no state withholding, no state itemized deduction worksheet.

Because there is no state income tax, there is also no state-level treatment of capital gains, dividends, or interest. A long-term capital gain in Texas is taxed only at the federal long-term capital gains rate (0%, 15%, or 20%) plus the 3.8% NIIT where applicable — making Texas particularly attractive for founders timing equity liquidity events and for retirees relying on portfolio income.

Texas paycheck breakdown for 2026

A typical Texas salaried employee earning $90,000 with $6,000 in pre-tax 401(k) contributions will see roughly the following on a 2026 paycheck:

• Federal income tax: ~$10,400 annual (using single status and 2026 brackets after the $15,000+ standard deduction).
• Social Security: $5,580 (6.2% × $90,000).
• Medicare: $1,305 (1.45% × $90,000).
• State income tax: $0.
• Net take-home: roughly $66,700 — about 74% of gross.

Texas property tax: the real state-level burden

Texas property taxes are assessed by each county appraisal district and levied by the county, city, school district, and any special districts (MUD, PID, ESD). The composite rate in suburban Dallas-Fort Worth, Austin, and Houston typically ranges from 2.0% to 2.7% of assessed value before homestead exemptions.

The Texas Homestead Exemption removes $100,000 from the assessed value used to calculate ISD taxes for a homeowner's primary residence (raised from $40,000 by Proposition 4 in 2023). Additional exemptions apply for age 65+, disability, and disabled veterans. Apply through your county appraisal district by April 30 of the tax year; the exemption is not automatic.

Senate Bill 2 (2023) also imposed a 20% annual cap on appraised value increases for non-homestead residential properties under $5M for a three-year pilot, partially mirroring the existing 10% homestead cap. Owners of investment property or short-term rentals should verify current appraisal protest deadlines (typically May 15) each year.

Sales tax and other Texas-specific taxes

Texas combined sales tax averages 8.25% (6.25% state plus up to 2% local). Groceries, prescription drugs, and most over-the-counter medications are exempt. Texas does not have an inheritance or estate tax. Vehicle registration is comparatively low; the state motor vehicle sales tax is 6.25% of purchase price.

Common Texas tax planning considerations

Even without state income tax, Texas residents have meaningful planning levers:

• Protest your appraisal every year. Free informal protests with your county appraisal district frequently knock 5–15% off the appraised value, with a direct impact on your bill.
• Use the homestead exemption and freeze. Filing once locks in the school-tax freeze at age 65 and protects against re-appraisal increases above 10% per year.
• Maximize 401(k), HSA, and traditional IRA contributions — they only reduce federal tax, but the federal savings are dollar-for-dollar.
• Consider Roth conversions in low-income years (e.g., between jobs or early retirement). Without state tax, the cost of converting in Texas is purely federal.
• If you own a Texas LLC or S-corp with revenue above $2.47M, model the franchise tax (0.375% retail/wholesale or 0.75% otherwise) when planning distributions.

Moving to or from Texas

Establishing Texas residency requires more than a mailbox — the Texas Comptroller and your prior state's revenue agency look at driver's license, voter registration, vehicle registration, location of primary home, time spent in-state (typically 183+ days), professional licenses, and family location. High-income relocators from California or New York should expect their prior state to scrutinize residency claims around the year of a major liquidity event.