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Texas State Taxes: What You’ll Pay in 2025

Posted on 01/08/25 by Elissa Chudwin, Rocky Mengle

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.

The big picture:

  • Income tax: Texas doesn’t tax individual income.
  • Property tax: 1.47 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 1.47 percent of a home’s assessed value in 2022, 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 July 2024 Tax Foundation data.
1140-state-tax-texas.jpg
Getty/AARP

How is income taxed in Texas?

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

Watch the video below to learn how to identify your 2024 federal income tax brackets.

Understanding Your 2024 Income Tax

Are pensions or retirement income taxed in Texas?

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.

What about investment income?

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

Does Texas tax Social Security benefits?

No, but you may pay federal taxes on a portion of your Social Security benefits, depending on your "provisional income." In most cases, provisional income is equal to the combined total of half your Social Security benefits, your adjusted gross income (not including any Social Security benefits) and any tax-exempt interest for the year.

Up to 50 percent of your benefits will be taxed if your provisional income is $25,001 to $34,000--or if you file jointly and your provisional income is $32,001 to $44,000.

Up to 85 percent of your benefits will be taxed if your provisional income is more than $34,000 individually or more than $44,000 as a couple.

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

How is property taxed in Texas?

The average property tax rate in Texas is 1.47 percent of the assessed value of your home — the seventh-highest in the country, according to the Tax Foundation.

Property taxes vary widely by municipality. The lowest median property tax paid was $513 in King County, while the highest was $7,202 in Collin County, according to 2022 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.

What about sales and other taxes?

  • 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 generally subject to sales tax in Texas (excluding feminine hygiene products and adult diapers), while most groceries — including bread, milk and eggs — are not taxed. More information about the taxation of groceries 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. 

Will I or my heirs have to pay inheritance and estate tax in Texas?

No. Texas has no inheritance or estate tax.

Are there any tax breaks for older Texas residents?

There are a few property tax breaks that let seniors claim a larger tax exemption, limit their tax bill, or defer payment of their taxes.

Homeowners 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 will 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.

In addition, qualifying seniors can claim the maximum property tax exemption available for disabled veterans. The exemption amount for most veterans is from $5,000 to $12,000, depending on their disability rating. However, disabled veterans who are at least 65 years old can qualify for a $12,000 exemption if their disability rating is at least 10 percent, they’re totally blind in at least one eye, or they have lost the use of at least one limb.

Homeowners who are at least 65 years old or disabled can also defer payment of property taxes on their home. However, taxes (and interest) that build up during the deferral period must be paid once they no longer own and occupy their home.

Go to the Texas comptroller’s website for more information about property tax exemptions.

Are military benefits taxed in Texas?

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

What is the deadline for filing federal taxes in 2025?

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.

Editor's note: This article was originally published on Feb. 9, 2023. It has been updated to reflect new information. 

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.

Rocky Mengle has more than 25 years of experience covering federal and state tax developments for CPAs, tax attorneys, and ordinary taxpayers, including stints at Kiplinger Personal Finance and Wolters Kluwer Tax & Accounting.

Also of Interest:

This story is provided by AARP Texas. Visit the AARP Texas page for more news, events, and programs affecting retirement, health care, and more.

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