Does Texas Tax Social Security or Retirement Income?

Texas does not tax any of your retirement income. The state has no personal income tax, so Social Security, pensions, IRA withdrawals, and 401(k) distributions all escape state tax.1 You still owe property tax on a home you own, and the federal rules on your income follow you to Texas.

This guide covers how Texas treats each kind of retirement income, what you still owe, and why property tax deserves a close look before you move.

In This Guide

• Does Texas Tax Social Security or Retirement Income?
• Texas Retirement Income Tax at a Glance
• What Texas Retirees Still Owe on Social Security and a Home
• The Property Tax Trade-Off
• Frequently Asked Questions
• Next Steps

Does Texas Tax Social Security or Retirement Income?

Texas taxes none of your retirement income. There's no state income tax, no state return, and no state withholding on a pension or IRA.

The reason is built into law. The Texas Comptroller states that Texas has no state income tax, and the Texas Constitution (Article VIII, Section 24-a, added November 5, 2019) provides that the legislature may not impose a tax on the net incomes of individuals.1 Because the bar sits in the constitution rather than in an ordinary statute, an ordinary bill cannot add an income tax.

That covers every source. A military pension, a teacher's pension, a corporate 401(k), a required minimum distribution, a Social Security check: Texas taxes all of them at zero.1 No income level triggers a tax. There's no retirement exclusion or senior credit to claim, because there's no income tax to reduce.

If you're relocating, confirm your residency cleanly. Get a Texas driver's license, register to vote, and document the move. Your former state sets its own rules for the year you leave, so check them before you file there.

Texas Retirement Income Tax at a Glance

Here's how each common income source is treated at the state level.

Every entry reads "None." That's the whole point of a no-income-tax state.1 Federal tax is a separate matter: part of your Social Security may be federally taxable, as the next section explains.

What Texas Retirees Still Owe on Social Security and a Home

Zero income tax doesn't mean zero taxes. Three bills still reach a Texas retiree.

Federal income tax. The federal rules on pensions, IRA withdrawals, and 401(k) distributions are the same in Texas as in any other state. The IRS sets them, not Texas. Your Social Security benefits may be taxable when one-half of the benefits plus all your other income, including tax-exempt interest, is greater than the base amount for your filing status.1 The base amount is $25,000 if you file as single, head of household, or qualifying surviving spouse, or file separately from a spouse you lived apart from all year. It is $32,000 on a joint return. It is zero if you're married, file separately, and lived with your spouse at any time during the year. Below the base amount, benefits aren't taxed federally, and no more than 85 percent of your benefits is ever taxable.3 Moving to Texas ends the state bill, not the federal one.

Property tax. This is the bill a Texas homeowner still owes. School districts and other local taxing units charge it.2 Three relief rules apply once you're 65 or older, or disabled:

• School homestead exemption: School districts exempt $140,000 of a homestead's value for all homeowners, plus an additional $60,000 if you're 65 or older or disabled.2
• School-tax ceiling: Once you hold that additional exemption, the school district can't raise its tax on your home above the amount it imposed in the first year you qualified that particular home. That's not necessarily the year you turned 65. New improvements to the home can still raise it.2
• Tax deferral: Under Tax Code Section 33.06, you can postpone the property taxes for as long as you own and live in the home. The deferred taxes aren't forgiven, and they accumulate 5 percent interest a year. You request it with Form 50-126 at the appraisal district. The deferral also reaches qualified disabled veterans and certain surviving spouses.2

A homeowner who is disabled doesn't have to wait until 65 for any of the three.2 See our Texas senior property tax relief guide for how the exemption, the tax ceiling, and the deferral work.

Sales tax. Texas charges a 6.25 percent state sales and use tax on retail sales, leases and rentals of most goods. Cities, counties, special purpose districts and transit authorities can add up to 2 percent, for a maximum combined rate of 8.25 percent.1

The Property Tax Trade-Off

The no-income-tax headline is real, but don't stop reading there. If you own a home, the property tax bill decides how much of that saving you keep.

If you rent, the income side is the whole comparison. Texas takes nothing on the income, and no property tax bill comes in your name.

If you own, work out what the school district will tax. Here's an illustration with a made-up home value. On a homestead appraised at $300,000, an owner who is 65 or older or disabled takes off $140,000 plus $60,000. That leaves $100,000 of the value for the school district to tax, before any local-option exemption.2 An owner who is under 65 and not disabled takes off only the $140,000, which leaves $160,000.2

Any taxing unit can also adopt a local-option over-65 exemption, which can't be less than $3,000, so the rest of the bill depends on where the home is.2 Claim the age-65-or-disabled exemption the year you qualify, because the school-tax ceiling comes with it.2

Run your own numbers before you move. Set the state income tax you'd stop paying against the property tax bill on the Texas home. No income tax doesn't by itself mean low taxes.

For families weighing how this income will cover care, start with our guide on how to pay for senior care, our framework for building a senior care funding plan, and our overview of retirement accounts for care.

Next Steps

• If you're moving to Texas, establish clean residency. Your former state sets its own rules for the year you leave, so check them before you file there.
• Check your federal return. Your Social Security benefits may still be taxable under the IRS test above, in Texas as anywhere else.1
• If you own a home, file Form 50-114, the Residence Homestead Exemption Application, with your county appraisal district. It's the form for the age-65 exemption, which applies for the entire year you turn 65. A late application can generally be filed up to two years after the delinquency date.2 The Comptroller posts the forms on its property tax forms page, and our Texas senior property tax relief guide covers the disability exemption and the deferral.
• Run the property-tax math. Ask the county appraisal district for the home's appraised value and the taxing units that tax it. Then compare that bill with the state income tax you'd stop paying.
• Plan your care funding. Read our guide to paying for senior care and retirement accounts for care.

Learn More

Find personalized help planning retirement income for senior care at brevy.com.

The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.