The state of Texas does not tax personal income. Property taxes and several other fees and taxes make up the essential revenue that funds the state budget. The Texas Office of the Comptroller reports that it collects 60 kinds of taxes. Although you do not have to file a state income tax return in Texas, the state taxes nearly every purchase.
When, as a resident of Texas, you complete your federal tax return and pay federal income taxes, you have fulfilled your obligation with regard to taxes on your wages, interest, Social Security and similar income sources. Whether your income is earned or unearned, you have no state income tax. Texas has no inheritance tax either, luring seniors with estates to the Lone Star state. Other states with no income tax are Alaska, Florida, Nevada, South Dakota, Washington and Wyoming. New Hampshire and Tennessee tax interest and dividends only, according to Retirement Living.
Texas' sales tax is 6.25 percent as of 2011. Counties, cities and other taxing authorities may charge another 2 percent in sales taxes, creating a potential total sales tax of 8.25 percent. Food and medicine are tax-exempt. A study conducted by Retirement Living found Texas and Illinois tied as the states with the highest sales tax rates in the nation.
Counties, cities, towns, schools and other local taxing units impose property taxes on landowners in the state of Texas. The public school systems in Texas are independent school districts, operating costs of which are funded by area property taxes. As of 2011, Texas has a homestead exemption of $15,000 for a principal residence and another $10,000 school-tax exemption for individuals over age 65. A disability exemption also exists for Texas property taxes. A homeowner may the exercise the age exemption or the disability exemption, but not both.
Although sales taxes may total 8.25 percent in Texas, fireworks sales carry an additional 2 percent tax. The hotel tax is 6 percent. You must register motor vehicles every year except the second year for a new vehicle. Automobile registration fees are based on the model year and weight of the vehicle. Throughout 2011, the fee for an average-weight passenger car from 2009 or newer is $58.80. Counties also impose a tax of about $10, which is added to the registration fee.
- Kiplinger; Retiree Tax Guide to Texas; October 2010
- Retirement Living Information Center: Taxes by State
- Texas Comptroller of Public Accounts: Overview of Texas Taxes
- Minnesota Center for Fiscal Excellence. "Comparison of Individual Income Tax Burdens by State." Page 1. Accessed Aug. 17, 2020.
- World Population Review. "Tax Burden by State 2020." Accessed Aug. 17, 2020.
- Tax Foundation. "Taxes in Texas." Accessed Aug. 17, 2020.
- Comptroller.Texas.gov. "Franchise Tax." Accessed Aug. 17, 2020.
- IRS. "Estate Tax." Accessed Aug. 17, 2020.
- The American College of Trust and Estate Counsel. "State Death Tax Chart." Accessed Aug. 17, 2020.
- Comptroller.Texas.gov. "Property Tax Exemptions." Accessed Aug. 17, 2020.
- Comptroller.Texas.gov. "Sales and Use Tax." Accessed Aug. 17, 2020.
- Texas.Comptroller.Gov. "Motor Fuels Taxes in a Changing Texas Transportation Scene." Accessed Aug. 17, 2020.
- Comptroller.Texas.Gov. "Cigarette Tax." Accessed Aug. 17, 2020.
- Comptroller.Texas.Gov. "Hotel Occupancy Tax." Accessed Aug. 17, 2020.
- eLaws.us. "SECTION 3.1281. Fireworks Tax." Accessed Aug. 17, 2020.
Linda Richard has been a legal writer and antiques appraiser for more than 25 years, and has been writing online for more than 12 years. Richard holds a bachelor's degree in English and business administration. She has operated a small business for more than 20 years. She and her husband enjoy remodeling old houses and are currently working on a 1970s home.