Texas State Taxes: Everything You Need to Know

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For the most part, the Lone Star State is considered a tax-friendly state — especially for retirees. It’s one of seven states that doesn’t have any income tax, which is a plus considering the effect state income taxes can have on residents. But there are some drawbacks regarding Texas taxes, too: State sales taxes are on the higher side when compared with other U.S. states.

Here’s what you need to know about the taxes in Texas, including whether it has some of the highest property taxes in the nation.

Texas State Taxes
Rate Range of Taxes 0% to 8.25%
State Sales Tax Rate Range 6.25% to 8.25%
State Income Tax Rate Range 0%
State Inheritance and Estate Tax Rate Range 0%
Average State Property Tax Rate 1.931%

Texas Income Tax

Texas is part of a small group of U.S. states that don’t charge income taxes. So although you still have to worry about your tax bracket when it comes to federal taxes, living in Texas gives you a free pass on state income tax.

Living in a state without income tax is a serious boon for retired residents because their Social Security benefits, payouts from pensions and IRA and 401K withdrawals are not subject to state income tax. Without state income tax rates in play, however, other taxes might be higher to compensate in order to pay for schools and infrastructure.

Texas Sales Taxes

The Texas state sales and use tax is currently set at 6.25 percent. But local taxing jurisdictions can legally add up to 2 percent more to the state’s rate — bring the allowable sales tax total up to 8.25 percent. In many Texas metro areas, such as Austin, San Antonio and Dallas-Fort Worth, the combined state and local sales tax rate is the full amount allowed by law.

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Texas Property Taxes

No source of Texas state tax dollars provides more money for local services than property taxes, according to the Texas Comptroller of Public Accounts website. Texas property tax dollars are assessed and levied by local taxing units, which result in varied rates between counties. Overall, the effective property tax rate for the state of Texas is 1.931 percent, and it ranks within the top 10 of highest state property taxes in the U.S.

Property taxes help pay for local services, such as streets, schools, libraries and emergency services. Texas has appraisal districts within its counties, which estimate what property is worth on January 1 of each year. In May of each year, an appraisal review board hears complaints from property owners who believe that their property values are incorrect or who did not receive exemptions they were expecting.

By August or September taxing units, such as the county, the local school district, hospital or junior college, adopt tax rates for the year. Tax collection begins in October and taxpayers generally have until Jan. 31 of the following year to pay their property taxes without penalty.

Check Out: 6 Things Every Homeowner Should Know About Property Taxes

Texas Inheritance Taxes and Estate Taxes

Texas has neither an inheritance tax nor an estate tax. At one time, Texas did have an inheritance tax, but it was repealed effective Sept. 1, 2015, according to the website for the Texas Comptroller of Public Accounts.

Click through to see which states have inheritance and estate taxes.

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