Texas State Taxes: What You’ll Owe in the 2026 Tax Season

Texas has no state income tax, and the state has significantly increased the homestead exemption on residential property. Those two factors contributed to the state being ranked at No. 7 on the Tax Foundation’s 2026 Competitiveness Index.

 The big picture:

• Income tax: Texas has no income tax.
• Property tax: The state had an effective tax rate of 1.40, according to the latest data from the Tax Foundation, although actual property tax rates vary by county.
• Sales tax: 6.25 percent statewide sales tax, though local jurisdictions may impose their own sales tax up to 2 percent, for a total maximum combined rate of 8.25 percent.

MEMBERS ONLY

How is income taxed?

The state has no income tax, per the state Constitution.

What about investment income?

Texas does not tax capital gains, according to the state Constitution.

Are Social Security benefits taxed?

As the state doesn’t tax income, Social Security is not subject to tax in Texas, though it may be subject to federal tax.

How is property taxed?

The state had an effective tax rate of 1.40 percent of a home’s assessed value, although actual property tax rates vary by county, and can be imposed by school districts, cities and other taxing districts. According to the Tax Foundation, the lowest property tax rate was 0.22 percent in Borden County, while the highest was 1.80 percent in El Paso County. Actual median property taxes paid ranged from $400 in McMullen County County to $7,727 in Travis County.

What about sales and other taxes?

• Sales tax: The statewide sales tax rate is 6.25 percent, although local jurisdictions (including cities, counties, transit authorities and special-purpose districts) may impose an additional sales tax of up to 2 percent, for a total maximum combined rate of 8.25 percent. Residents can look up their local sales tax here. Exemptions include most groceries, medications, newspapers, many baby products and personal hygiene products. More information on sales tax exemptions is available here.
• Gas and diesel: Gas and diesel are each taxed at 20 cents per gallon.
• Vehicle tax: The sale of vehicles is subject to a 6.25 percent motor vehicle tax. There is no local sales tax on motor vehicles.
• Alcohol: Alcohol purchases include state and local sales taxes, which includes the 6.25 percent state sales tax and up to 2 percent in local taxes, for a maximum tax of 8.25 percent. The state also imposes an 8.25 percent tax on mixed drinks, distilled spirits, beer, ale and wine purchased by the glass at a bar or restaurant. The cost can be included in the amount charged per drink or added as a line item on the buyer’s receipt.
• Lottery: The state has no income tax, so does not tax lottery winnings; however, the federal government imposes its own taxes, and the Texas Lottery withholds 24 percent of any prizes exceeding $5,000 for those federal taxes.

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

Texas has no inheritance or estate tax.

Are there any tax breaks for older residents?