Tool | October 2016

State-by-State Guide to Taxes on Retirees

Our comprehensive guide to taxes on retirement income, property and purchases, as well as special tax breaks for seniors, in every state.

Texas

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The Bottom Line
Map of Texas

Tax-Friendly

The Lone Star State is a no-income-tax state, so Social Security benefits and all forms of retirement income escape taxes in Texas. Sales taxes run high. The state offers a homestead exemption for all homeowners, as well as a homestead exemption for seniors.

State Sales Tax

7% state levy. Localities can add up to 2.%, with an average combined rate of 8.17%, according to the Tax Foundation.

Income Tax Range

Texas has no state income tax.

Social Security

Benefits are not taxed.

Exemptions for Other Retirement Income

Retirement income is not taxed.

IRAs

Retirement income is not taxed.

401(k)s and Other Defined-Contribution Employer Retirement Plans

Retirement income is not taxed.

Private Pensions

Retirement income is not taxed.

Public Pensions

Retirement income is not taxed.

Property Taxes

To qualify for the $15,000 school district homestead exemption, the home must be the principal residence of the filer on January 1 of the tax year. Also, each local taxing unit has the option to offer a separate exemption of up to 20% of the total value.

The median property tax on Texas' median home value of $139,600 is $2,595.

Tax breaks for seniors: If you are age 65 or older, or disabled, you qualify for the homestead exemption as soon as you turn 65; you need not own your home on January 1, but the home must be your principal residence. For homeowners who are 65 and older or who are disabled, $10,000 (in addition to the regular $12,000 homestead exemption) of the property's assessed value is exempt from school taxes. Other taxing units may offer an exemption of at least $3,000 to homeowners who are age 65 or older or who are disabled (at the taxing unit's discretion or as a result of a voter petition).

Once a homeowner turns 65 or is disabled, the owner benefits from a tax ceiling for that home for school taxes. If the homeowner improves the home (other than normal repairs or maintenance), the tax ceiling is adjusted for the new additions. School-district taxes are frozen at the level imposed on the residence the year the owner turned 65 or became disabled. Counties, cities, towns and junior-college districts can establish a tax freeze on homesteads of people who are 65 or older or who are disabled.

A homeowner who is 65 or older or disabled may qualify to defer their property taxes until he or she no longer owns or occupies the home as a residence. Property taxes continue to accrue during the deferral period and are assessed interest at the rate of 8% a year. Once the deferral ends, the taxes and accrued interest must be paid.

Inheritance and Estate Taxes

There is no inheritance tax or estate tax.