Texas does not levy a state income tax on individual wages and salary. This prohibition is enshrined in the state constitution.
Tax Overview
Texas constitutionally prohibits a state personal income tax. As the second-largest state by both population and economy, Texas funds its government through a combination of sales taxes, property taxes, and the franchise (margin) tax on businesses. The absence of a state income tax is a major draw for individuals and businesses relocating to the state, though residents often face higher property taxes as a trade-off.
Other Taxes in Texas
6.25% state sales tax rate, with local taxes up to 2% additional, for a maximum combined rate of 8.25%. Groceries and prescription drugs are exempt.
Among the highest effective rates in the U.S., averaging 1.60%–1.80%. Texas offers a $100,000 homestead exemption for school district taxes and additional exemptions for seniors and disabled homeowners.
The franchise (margin) tax applies to businesses with total revenue over $2.47 million at 0.75% (0.375% for wholesalers/retailers). This is the primary business-level tax in Texas.
20 cents per gallon on gasoline and diesel fuel, which has remained unchanged since 1991.
Severance taxes on oil production (4.6%) and natural gas production (7.5%), which contribute significant revenue to the state budget.
Federal Taxes Still Apply
While Texas does not levy a state income tax, residents are still subject to federal income tax, FICA taxes (Social Security and Medicare), and self-employment tax. Use our Federal Income Tax Calculator to estimate your federal tax liability.