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Texas Taxes: What You Need to Know
Texas has a unique tax structure. It does not impose individual or corporate income taxes but utilizes various other taxes to generate revenue for government functions.
Key points about the state of Texas’s tax system include:
- Individual Income Tax: None
Source: Texas Comptroller: Taxes Overview
- Corporate Income Tax: None (franchise tax applied instead)
Source: Texas Comptroller: Franchise Tax
- State Sales Tax Rate: 6.25%
Source: Texas Comptroller: Sales and Use Tax
- Maximum Combined State and Local Sales Tax Rate: 8.25%
Source: Texas Comptroller: Local Sales and Use Tax FAQ
- Franchise Tax No Tax Due Threshold (2026): $2,650,000
Source: Texas Comptroller: Franchise Tax Rates, Thresholds and Deduction Limits
- Estate and Inheritance Tax: None
Source: Texas Comptroller: Taxes Overview
- Gas Tax Rate: $0.20 per gallon
Source: Texas Comptroller: Gasoline Tax
Major Taxes
- Sales and Use Tax: 6.25% on goods and taxable services
Source: Texas Comptroller: Sales and Use Tax
- Motor Vehicle Sales Tax: 6.25% (after trade-in allowance)
Source: Texas Comptroller: Motor Vehicle Taxes
- Motor Fuel Tax: $0.20 per gallon for gasoline and diesel
Source: Texas Comptroller: Gasoline Tax
- Franchise Tax (2026 and 2027): 0.375% for retail/wholesale; 0.75% for all other businesses; No Tax Due threshold is $2,650,000
Source: Texas Comptroller: Franchise Tax Rates, Thresholds and Deduction Limits
- Single Local Use Tax Rate for Remote Sellers (2026): 1.75%
Source: Texas Comptroller: Tax Policy News January 2026
An Overview of The Tax Withholdings
Federal, State, and Local Tax Withholding
- Federal Tax Withholding: This is the amount withheld from your paycheck by your employer to cover your federal income tax obligations. The amount withheld depends on your income, filing status, and the number of allowances you claim on your W-4 form. For 2026, federal income tax rates range from 10% to 37%.
Source: IRS Revenue Procedure 2025-32: 2026 Federal Tax Rate Tables
- State Tax Withholding: Texas does not have a state income tax, so residents do not have state tax withholding.
Source: Texas Comptroller: Taxes Overview
- Local Tax Withholding: Texas does not impose local income taxes, so there is no local income tax withholding.
Source: Texas Comptroller: Taxes Overview
FICA and State Insurance Taxes
- FICA Taxes: The Federal Insurance Contributions Act (FICA) tax includes Social Security and Medicare taxes. For 2026, the Social Security tax rate is 6.2% for employees and employers, up to a wage base of $184,500. The Medicare tax rate is 1.45% for employees and employers, with an additional 0.9% Medicare tax on wages over $200,000 for single filers (not matched by employers).
Source: SSA: Maximum Taxable Earnings for Social Security 2026
Source: IRS Topic 751: Social Security and Medicare Withholding Rates
Source: SSA 2026 COLA Fact Sheet
- State Insurance Taxes: Texas does not have state-specific insurance taxes that are withheld from employee paychecks.
Source: Texas Comptroller: Taxes Overview
Pre-Tax Deductions
- Medical Insurance: Premiums for employer-sponsored health insurance plans are typically deducted from your paycheck before taxes, reducing your taxable income.
- 401(k) Contributions: Contributions to a 401(k)-retirement plan are pre-tax, meaning they are deducted from your gross income before federal income taxes are applied. For 2026, the contribution limit is $24,500. For employees aged 50 to 59 and 64 and older, an additional catch-up of $8,000 is allowed (total $32,500). For employees aged 60 to 63 under SECURE 2.0, the enhanced catch-up is $11,250 (total $35,750).
Source: IRS IR-2025-111: 401(k) Limit Increases to $24,500 for 2026
Source: IRS: Retirement Topics 401(k) Contribution Limits
- Health Savings Accounts (HSA): Contributions to an HSA are pre-tax and can be used to pay for qualified medical expenses. For 2026, the contribution limits are $4,400 for self-only coverage and $8,750 for family coverage.
Source: IRS IRB 2025-21: HSA Contribution Limits 2026
Source: IRS Publication 969: Health Savings Accounts
Tax Percentage Table
| Tax Type | Employee Rate | Employer Rate | Total Rate | Wage Base |
|---|---|---|---|---|
| Federal Income Tax | Varies by income | N/A | N/A | N/A |
| Social Security (FICA) | 6.2% | 6.2% | 12.4% | $184,500 |
| Medicare (FICA) | 1.45% | 1.45% | 2.9% | No limit |
| Additional Medicare | 0.9% (over $200,000) | 0% | 0.9% | No limit |
| 401(k) Contributions | Up to $24,500 | N/A | N/A | N/A |
| HSA Contributions | $4,400 (self) / $8,750 (family) | N/A | N/A | N/A |
Source: SSA: Maximum Taxable Earnings 2026
Source: IRS Topic 751: FICA Withholding Rates
Source: IRS IR-2025-111: 401(k) Limits 2026
Source: IRS IRB 2025-21: HSA Limits 2026
Median Household Income in Texas
According to the U.S. Census Bureau (via FRED, Federal Reserve Bank of St. Louis), the median household income in Texas was $81,490 in 2024 (current dollars), up from $74,640 in 2022. This figure provides insight into the economic well-being of Texas residents.
Source: U.S. Census Bureau / FRED: Median Household Income in Texas
| Year | Median Household Income |
|---|---|
| 2022 | $74,640 |
| 2023 | $79,060 |
| 2024 | $81,490 |
Source: U.S. Census Bureau / FRED: Median Household Income in Texas
Texas Tax Brackets 2026
Texas does not impose a state income tax, so residents only need to consider federal income tax brackets. Here are the federal tax brackets for 2026 for single filers, married couples filing jointly, and heads of household:
Source: IRS Revenue Procedure 2025-32: 2026 Federal Tax Rate Tables
| Filing Status | Tax Rate | Income Bracket |
|---|---|---|
| Single | 10% | $0 to $12,400 |
| 12% | $12,401 to $50,400 | |
| 22% | $50,401 to $105,700 | |
| 24% | $105,701 to $201,775 | |
| 32% | $201,775 to $256,225 | |
| 35% | $256,225 to $640,600 | |
| 37% | Over $640,600 | |
| Married Filing Jointly | 10% | $0 to $24,800 |
| 12% | $24,800 to $100,800 | |
| 22% | $100,801 to $211,400 | |
| 24% | $211,401 to $403,550 | |
| 32% | $403,551 to $512,450 | |
| 35% | $512,451 to $768,700 | |
| 37% | Over $768,700 | |
| Head of Household | 10% | $0 to $17,700 |
| 12% | $17,701 to $67,450 | |
| 22% | $67,451 to $105,700 | |
| 24% | $105,701 to $201,750 | |
| 32% | $201,751 to $256,200 | |
| 35% | $256,201 to $640,600 | |
| 37% | Over $640,600 |
Source: IRS Revenue Procedure 2025-32: 2026 Federal Tax Brackets
Source: IRS IR-2025-103: 2026 Inflation Adjustments
Example:
In Texas, a single filer earning $60,000 a year will pay $0 in state income tax and approximately $5,458 in federal income tax in 2026 (based on the 2026 federal standard deduction of $16,100 for single filers, resulting in taxable income of $43,900).
Source: IRS IR-2025-103: 2026 Standard Deduction
| Income Tax Summary for $60,000 Salary in Texas | Amount |
|---|---|
| Gross Income | $60,000 |
| 2026 Federal Standard Deduction (Single) | $16,100 |
| Texas State Tax | $0 (no state income tax) |
| Marginal Tax Rate (Texas State) | 0% |
Source: Texas Comptroller: Taxes Overview
Source: IRS IR-2025-103: 2026 Standard Deduction ($16,100 single)
Texas generates revenue from sales and use taxes, property taxes, and the franchise tax instead of taxing individual income.
