Texas Tax Guide 2025

Picture of Texas state flag on flag pole against blue sky.

Navigating the complexities of state taxes can be daunting, but understanding the Texas tax landscape is essential for residents and newcomers.

In this guide, we'll explore key components of The Lone Star State's tax system, from income and sales taxes to property taxes and retirement benefits.

Texas state tax: Overview

Overall, Texas offers pros and cons when it comes to taxes.

The statewide sales tax starts at 6.25 percent, and local areas can tack on up to 2% more, which can make shopping a little pricey.

Meanwhile, property taxes in the Lone Star State are also relatively high, but some homeowners have recently seen relief due to legislative changes.

But: Two Texas property tax bills will be on the state's ballot this fall. So, more relief could be on the way. This includes increased homestead exemptions and a property tax cut for businesses.

If approved by voters in November, homeowners and business owners could receive $10 billion in tax relief funds.

For more information, see Property Tax Relief Bill in Texas: What to Know for 2025.

[Data for this state tax guide was gathered from a number of sources including the Census Bureau, the state’s government website, the Sales Tax Handbook, and the Tax Foundation. Property taxes are cited as a rate percentage rather than the assessed value.]

Texas income tax

Texas is one of nine U.S. states with no income tax.

Texas retirement taxes

There is no personal income tax in Texas. That means none of your retirement income will be taxed at the state level. There are no estate or inheritance taxes in Texas either.

Social Security: Not taxable
Pensions: Not taxable
401(k) and IRA Distributions: Not taxable

Texas sales tax

Texas has a 6.25% state sales tax rate, but not all items are taxable.

Groceries: Exempt
Prescription drugs: Exempt
Over-the-counter medications: Exempt
Clothing: Taxable

However, Texas holds three sales tax holidays every year, one of which focuses on back-to-school essentials. For more information, check out Kiplinger's report, Texas Sales Tax-Free Weekend 2025.

How much are property taxes in Texas?

In Texas, the average effective property tax rate is 1.36%. A Texas property tax relief measure enacted last year lowered property taxes for many Texans, partially due to an increase to the state's homestead exemption.

Texas Property Tax Breaks for Retirees

Homestead Exemption: Homeowners age 65 or older may be eligible for a special homestead exemption for their principal residence. For qualified homeowners, $10,000 of the property's assessed value is exempt from school taxes (in addition to the regular homestead exemption of $100,000). Other taxing units may also offer an exemption of at least $3,000 to qualified homeowners.