Texas State Tax Guide: What You’ll Pay in 2024

En español | You won’t pay any state taxes on income in Texas, even if it’s earned from investments or a retirement plan. But there is a trade-off: The state’s average property and sales tax rates are among the highest in the U.S.

• Income tax: Texas doesn’t tax individual income.

• Property tax: 1.68 percent of a home’s assessed value (average) 
  Real estate taxes vary depending on where you live, but the average property tax rate in Texas was 1.68 percent of a home’s assessed value in 2021, according to the Tax Foundation.

• Sales tax: 8.2 percent (average combined state and local)
  The state levies a 6.25 percent sales tax on goods and services, and local sales tax rates are as much as 2 percent. The average combined sales tax rate is 8.2 percent, according to January 2024 Tax Foundation data.

Texas is among a handful of states that do not tax individual income.

Watch the video below to learn how to identify your 2023 federal income tax brackets.

No, pension distributions, IRAs, 401(k) plans and other retirement plan income are not taxed in the state.

The AARP Retirement Calculator can help you determine if you are saving enough to retire when — and how — you want.

You won’t pay any state tax on investment income in Texas.

No, but you may pay federal taxes on a portion of your Social Security benefits, depending on your income. Up to 50 percent of your benefits will be taxed if you file an individual tax return and make between $25,000 and $34,000 in total income — or if you’re a married couple filing jointly and make $32,000 to $44,000 in total income. And up to 85 percent of your benefits will be taxed by the federal government if your total income is more than $34,000 individually or $44,000 as a couple. If you receive less than $25,000 as an individual and $32,000 as a couple, your Social Security benefits aren't taxed.

AARP's Social Security Calculator can assist you in determining when to claim and how to maximize your Social Security benefits.

The average property tax rate in Texas is 1.68 percent of the assessed value of your home — the sixth-highest in the country, according to the Tax Foundation.

Property taxes vary widely by municipality. The lowest median property tax paid was $416 in Ward County, while the highest was $6,658 in Collin County, according to 2021 data from the Tax Foundation.

Your home’s appraised value and the tax rate determined by local governments are used to calculate your property taxes. More information about how property taxes are calculated and how to protest your home’s property value or file for an exemption is on the Texas comptroller’s website. 

Texas taxes personal property, such as a vehicle, only if it’s used to earn income.

• Sales tax: Retail sales, services, and rented or leased goods are taxed at 6.25 percent statewide. Local sales tax rates can be no higher than 2 percent. The average combined sales tax rate in Texas is 8.2 percent, according to the Tax Foundation.
  
  Clothing and hygiene products are subject to sales tax in Texas, while most groceries — including bread, milk and eggs — are not taxed. More information is available at the Texas comptroller’s website.

• Gas and diesel: There is a 20 cent-per-gallon tax levied on gas and diesel fuel. There is no additional state sales tax. 

• Alcohol: Consumers purchasing alcohol from a retailer are required to pay both state sales and local sales taxes.
  
  The state also levies excise taxes on alcohol. Distilled spirits are taxed at $2.40 per gallon, wine between 20 and 52 cents per gallon and beer at 19 cents per gallon. These taxes are paid by the vendor or manufacturer, but some or all may be included in the retail price.
  
  Texas levies a mixed beverage gross receipts tax (6.7 percent) and a mixed beverage sales tax (8.25 percent) on alcohol purchased from a bar or restaurant. The mixed beverage sales tax may be paid directly by consumers, while the mixed beverage gross receipts tax is paid by the business.

• Hotels: Guests are taxed 6 percent of the price of any room costing more than $15 per day, whether it’s a hotel, bed-and-breakfast or short-term home rental. Some municipalities also levy additional local hotel taxes.

• Lottery: There’s no state tax on lottery winnings in Texas, but you’ll still owe federal income tax on your prize money. Find more information on the Texas Lottery website. 

No. Texas has no inheritance or estate tax.

Several property tax exemptions exclude a certain amount from your home’s appraised value, which is used to calculate your property taxes. 

Homeowners may receive a $100,000 homestead exemption from their primary property’s appraised value for property taxes collected by school districts. If you’re 65 or older or have a disability, you may receive an additional exemption of $10,000. Other local governments also may offer a similar exemption of $3,000 or more.

A mandatory property tax limitation on school district taxes also is offered to residents who have a disability or are 65 and older, which freezes the amount paid at the year you turn 65 years old.

Go to the Texas comptroller’s website for more information.

Because there is no state income tax, military income is not taxed in Texas.

Texas residents do not file returns for state income taxes. The deadline for filing federal tax returns is Monday, April 15. For help estimating your annual income taxes, use AARP's 1040 Tax Calculator.

This guide was originally published on Feb. 9, 2023 and has been updated to reflect new information.

• States with Highest and Lowest Sales Tax Rates
• How to Get Free Help With Your Taxes
• Your 2023 Tax Brackets vs. 2022 Tax Brackets
  

Elissa Chudwin covers federal and state policy and writes the podcast Today’s Tips from AARP. She previously worked as a digital producer for  The Press Democrat in Santa Rosa, California, and as an editor for Advocate magazines in Dallas. Writer Michelle Tuccitto Sullo contributed to this story.