Texas Income Tax Structure

Texas has no state income tax. This applies to all types of income including wages, salaries, interest, dividends, capital gains, and business income. Texas is one of only seven states in the US that does not collect any form of state income tax.

Constitutional Protection Against Income Tax

The Texas Constitution strictly limits the state's ability to impose an income tax. Any future attempt to create a Texas income tax would require a constitutional amendment, which would need approval from a majority of Texas voters in a statewide referendum.

Federal Income Tax

Federal income tax is based on federal tax brackets, your filing status, deductions, and W-4 allowances. Pre-tax deductions like 401(k) or HSA contributions reduce your federal taxable income.

FICA Taxes

FICA taxes fund Social Security and Medicare.

• Social Security: 6.2% on income up to $168,600 for 2024.
• Medicare: 1.45% on all income, with an additional 0.9% on income above certain thresholds.

Other Texas Taxes

• Property Tax: While Texas has no state income tax, it makes up for this with relatively high property taxes. Texas has one of the highest effective property tax rates in the nation, averaging about 1.80% of home value. This varies by county and city.
• Sales Tax: Texas has a state sales tax rate of 6.25%, and local taxing jurisdictions can each impose up to 2% in additional sales taxes for a maximum combined rate of 8.25%.
• No Estate or Inheritance Tax: Texas does not impose estate or inheritance taxes.
• Business Taxes: While there's no personal income tax, Texas does impose a "Franchise Tax" (also called the "Margin Tax") on certain businesses operating in Texas.

Disclaimer: This information is for general guidance for the 2024 tax year and is not tax advice. Consult a tax professional for personalized advice.