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Official Tax Guide

Texas Taxes 2025: Income, Sales, and Property Tax Guide

Complete guide to Texas state taxes. Income tax (0%), sales tax, and what you need to know before moving.

Updated January 15, 2026
5 min read

State Tax Guide 2025: Texas

Welcome to Texas! As you plan your relocation, understanding the state's tax landscape is crucial for budgeting and financial planning. Texas is often celebrated for its tax-friendly environment, particularly regarding income tax. This guide provides a clear overview of what to expect in 2025.

1. Income Tax

One of the most significant financial benefits of living in Texas is the complete absence of a state income tax.

  • Rate: 0%. Texas does not levy a tax on personal wages, salaries, dividends, or interest income.
  • Structure: This is neither a flat nor a progressive tax system, as there is no tax to calculate. All residents, regardless of income level, pay $0 in state income tax.

Note: While you will not pay state income tax, you are still responsible for federal income taxes.

2. Sales Tax

Texas imposes a state sales tax on most retail goods and services. The total sales tax you pay is a combination of the state rate and local add-ons.

  • State Rate: 6.25%
  • Local Rates: Cities, counties, special districts, and transit authorities can levy additional sales taxes. This means the total sales tax rate can be higher than the state rate, often reaching 8.25% in some areas.
  • What's Taxed: Most tangible goods and many services. Groceries are subject to the state sales tax, though local jurisdictions may exempt them.

3. Property Tax

Texas does not have a state property tax. Instead, property taxes are levied by local governments (counties, cities, school districts, and special districts) to fund public services.

  • Overview: Texas has some of the highest average property tax rates in the United States to compensate for the lack of income tax.
  • Rate: While rates vary significantly by locality, they generally range from 1.5% to 2.0% of the home's assessed value. This is considerably higher than the national average.
  • Homestead Exemption: Texas offers a homestead exemption for primary residences, which can reduce the taxable value of your home. It's essential to apply for this exemption with your local county appraisal district.

4. Other Taxes

Beyond income, sales, and property taxes, here are other notable taxes in Texas:

  • Gas Tax: Texas levies a tax on gasoline and diesel fuel. As of 2025, the state gasoline tax is 20 cents per gallon.
  • "Sin" Taxes: Texas imposes excise taxes on specific goods:
    • Cigarettes: $1.41 per pack of 20.
    • Alcohol: Tax rates vary based on the type of beverage (beer, wine, liquor) and alcohol content.
  • Inheritance/Estate Tax: Texas does not have an inheritance or estate tax. Assets passed to heirs are not taxed at the state level.

5. Retiree Taxes

Texas is a very popular destination for retirees, largely due to its tax policies.

  • Retirement Income: Texas does not tax retirement income. This includes:
    • Social Security benefits
    • Pensions
    • 401(k) and IRA distributions
  • Property Taxes for Seniors: Texas offers additional property tax breaks for seniors, including a homestead exemption increase for those aged 65 or older. Some school districts also offer a "senior freeze" that caps the taxable value of a homestead for qualifying residents.

6. Comparison to Neighboring States

Texas's tax structure is distinct compared to its neighbors:

  • Louisiana: Has a state income tax (progressive, with rates from 1.85% to 4.25%) but much lower property taxes and slightly higher sales taxes.
  • Oklahoma: Has a progressive income tax (rates from 0.25% to 4.75%) and lower property taxes.
  • New Mexico: Has a progressive income tax (rates from 1.7% to 5.9%) and a higher average sales tax rate when combined with local taxes.
  • Arkansas: Has a progressive income tax (rates from 2.0% to 5.5%) and lower property taxes.

Key Takeaway: Texas stands out for its 0% income tax and no tax on retirement income, making it financially attractive for workers and retirees alike. However, be prepared for potentially higher property and sales taxes depending on your location.

Disclaimer

This guide is for informational purposes only and is based on tax laws and rates effective for 2025. Tax laws change frequently and can be interpreted differently. This information is not a substitute for professional tax advice. Please consult a Certified Public Accountant (CPA) or tax professional for advice tailored to your specific financial situation.