Texas is one of the few states with no state income tax, a protection enshrined in the Texas Constitution (Article 8, Section 24-a). Residents keep 100% of their earnings from state income tax, though they face other taxes. The state sales tax rate is 6.25%, with local additions up to 2% for a maximum combined 8.25%.Use the calculators below to understand your Texas tax picture for 2026.
Income Tax
None (0%)
Sales Tax
State rate 6.25%
Capital Gains
No state tax
Texas Sales Tax
Texas levies a 6.25% state sales tax. Local jurisdictions (cities, counties, transit authorities, and special districts) may add up to 2%, bringing the maximum combined rate to 8.25%. Most grocery food items are exempt from Texas sales tax.
How Texas Funds State Government
Texas funds state government primarily through sales tax (6.25% state + up to 2% local), oil and gas severance (production) taxes, and the franchise (margin) tax on businesses. Texas's constitution bars a state property tax (Article 8, Section 24-a); the trade-off residents feel is high local property taxes levied by school districts, cities, counties, and special districts. The absence of a state income tax is also constitutionally prohibited.
OBBBA Deductions
The One Big Beautiful Bill Act (OBBBA) introduced federal deductions for tips, overtime, and senior income. Since Texas has no state income tax, there is no state-level conformity issue. The federal deductions reduce your federal taxable income regardless. You already pay $0 state tax on all income.
No. Texas has no state income tax. The Texas Constitution (Article 8, Section 24-a) prohibits a state income tax. This means 100% of your wages, tips, overtime, and other earned income are free from state income tax withholding.
What is the sales tax rate in Texas?
The state sales tax rate is 6.25%. Local jurisdictions may add up to 2% for a maximum combined rate of 8.25%. Most grocery food items are exempt from Texas sales tax.
How does Texas fund state government without an income tax?
Texas funds state government primarily through sales tax, oil and gas severance taxes, and the franchise (margin) tax on businesses. Texas's constitution bars a state property tax; the trade-off residents feel is high local property taxes levied by school districts, cities, counties, and special districts.
Does the OBBBA overtime/tips deduction matter in Texas?
The OBBBA deductions for tips and overtime apply to your federal tax return regardless of state. Since Texas has no state income tax, there is no state-level conformity issue. You already pay $0 state tax on all income including tips and overtime.
Does Texas tax retirement income?
No. Texas has no state income tax, so Social Security benefits, pensions, 401(k) distributions, and IRA withdrawals are all free from state-level taxation.
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