Pay 
Language 
Currency 
No results found
Taxes in Texas: Which should I pay?
Come live in the state with no income tax and learn about the taxes in Texas for individuals and businesses.
Among all the taxes in Texas that you must declare if you are going to live in this state for a while, did you know that there is no state income tax? This makes it one of the most popular destinations in the US for workers, digital nomads, and entrepreneurs looking to save on their annual tax declaration. However, this doesn’t mean Texas has no other state-level taxes you need to be aware of.
In this article, we’ll explain in detail what taxes individuals and businesses must pay in Texas, what rates apply, what each tax consists of, its purpose, and how it could affect your budget. We’ll also discuss the tax benefits you can take advantage of, so if you’re thinking of moving to this southern US state, don’t miss the following information!
Taxes for Individuals in Texas
Individuals living in Texas are those who do not belong to any association or entity and are individual beings with rights and obligations, such as the taxes in Texas that they must pay. If you’re a digital nomad wanting to live in this state for a while, an exchange student, or someone looking for local work, pay attention to the following mandatory taxes.
1. Personal Income Tax
As mentioned earlier, among the taxes in Texas, there is no personal income tax at the state level. This means you only need to pay the federal tax, which is used to fund social security, public health, education, and welfare programs.
Foreigners with permanent residency will have to pay this tax on their global income. On the other hand, if you’re not a resident, you’ll only be required to declare the income you earn in the country, with progressive tax rates depending on your income level:
- 10% rate: Up to $11,600 (€10,190).
- 12% rate: $11,601-47,150 (€10,190-41,422)
- 22% rate: $47,151-100,525 (€41,422-88,313)
- Up to 37% rate: For higher incomes
2. Sales tax
All individuals have to face taxes in Texas related to sales, the Sales Tax, which applies to most goods purchased and some services hired. This is an additional rate that businesses add to the final price and then remit to the state of Texas. The aim of this tax is to fund public services like transport, road maintenance, and social programs. Here are the rates:
- State rate: 6.25%
- Optional local rate: Up to 2%
- Maximum total rate: 8.25%
- Example: If you buy a computer worth $1,000 (€878), you might pay up to $82.50 (€72.50) in tax, added to the final price.
3. Property tax
Another tax in Texas is the property tax. Although there’s no state-level tax, there is a local tax at the county, municipal, school, and hospital district levels. Each entity sets its own rate, and these are added together, making up the total amount you need to declare for each property in your name.
The rate applied depends on the property’s appraisal value, averaging around 1.6%, though some counties can charge up to 2.3%. For example, if you buy a house in Travis County worth $300,000 (€276,000), the following rates will apply:
- Travis County: 0.40%
- Austin City: 0.55%
- Local school district: 1.25%
- Total to pay: $6,600 (€5,798)
4. Motor Vehicle Tax
In addition to property taxes, for every vehicle an individual owns in Texas, they must pay the state tax of 6.25% at the time of purchase, plus registration fees ranging from $90 to $150 (€79–€131), depending on the type of vehicle.
For example, if you’re driving in Texas and buying a car worth $20,000, you’ll pay a total of $1,250 (€1,098) in taxes. If the purchase price is below the vehicle’s estimated value, the state may calculate the tax based on its own standard vehicle value.
Taxes for Businesses in Texas
Are you planning to set up a business and want to know which taxes you need to declare in Texas? Whether you are a legal entity or a business in this state, there are specific taxes designed for entities created for commercial activities. Below, we detail the main taxes to consider.
1. Franchise Tax
Since there is no state income tax among the taxes in Texas, the state government has designed a tax on the gross margins of businesses’ annual profits. This tax is collected to fund public services such as education and transport. Therefore, if your business has gross annual revenue of over $2.47 million, you’ll need to pay the following rates:
- 0.75% rate: For all entities in general
- 0.375% rate: For wholesale and retail businesses
- Exemption: For businesses with income below $2.47 million (€2.27 million).
- Example: A service business with income of $5,000,000 (€4,392,630) and deductible expenses of $2,000,000 (€1,757,052) has a margin of $3,000,000. The tax to be paid would be $22,500 (€19,766) annually.
2. Sales tax
As mentioned in the individual taxes section, this indirect tax applies to purchased goods and services. In this case, businesses are responsible for collecting, through their customers, an extra percentage added to the price of their products, which they then remit to the state.
The rate applied is 6.25% at the state level, plus an additional local rate that can go up to 2%. For example, if your store sells an item for $100 (€87.85) in Austin, you’ll need to charge the customer an extra 8.25%, bringing the total price to $108.25 (€95.10).
3. Commercial Property Tax
As we also saw in the section about individuals, we remind you that, although there is no state tax on commercial property among the taxes in Texas, counties and cities within the state do apply it individually.
What is the collected money used for? It’s the main source of income to fund public schools, firefighters, hospitals, and other local services. The rate depends on each county, but it’s approximately set at an effective average of 1.60% of the appraisal value.
4. Unemployment Tax
If you have employees, you’ll want to know about this tax in Texas, which funds unemployment benefits for workers. Thanks to a contribution you must make on the first $9,000 (€7,906) of your employees’ annual salaries, the government can provide benefits when a worker loses their job through no fault of their own. Here’s how the rates work:
- 2.7% rate: For new businesses
- 0.31% to 6.31% rate: Depending on the company’s profits and history
- Example:A new business that pays an employee $40,000 (€35,141) annually would pay 2.7% on the first $9,000 (€7,906), totalling $243 (€213).
How to Pay Taxes Online in Texas
All taxes in Texas can be paid online thanks to the digital portals the state government and local administrations have implemented. This makes the payment process faster and more convenient, especially for foreign citizens to fulfill their tax obligations from their home country or for entrepreneurs who travel often for business. Here’s how to do it:
| Tax Type | Official portal | Instructions |
|---|---|---|
| Franchise or Sales | Comptroller Texas Gov | Register, choose tax type, review the data and make the payment. |
| Property | Each county has its own portal, such as the Travis County Tax Office. | Search for your property, verify the amount, and choose your payment method. |
| Vehicles | Texas Department of Motor Vehicles | Enter the registration number, check the information, and choose the payment method. |
Official portals for paying taxes online in Texas.
The best way to do this is with a stable, secure internet connection, like the Holafly monthly plans. With them, you’ll have unlimited data, 5G coverage, and global service that lets you stay online in Texas and over 160 countries, without roaming charges. Plus, you can connect multiple devices at once!
Important: If you are a frequent traveler and want to stay connected without worrying about expensive roaming or looking for a new SIM at every destination, Holafly’s subscription plans are for you. With a single eSIM, enjoy internet in more than 160 countries for a fixed price and no surprises on your bill. Travel without limits and connect easily and securely! 🚀🌍
On the other hand, if your trip is short, you can opt for the eSIM for the USA from Holafly, as it provides unlimited data only for the days you need, with no roaming costs and no SIM card changes.
Tax Benefits in Texas
After reviewing the main taxes in Texas for individuals and businesses, now it’s time to look at the potential tax advantages in this state. Thanks to the incentives the government has implemented, more and more businesses are deciding to start their commercial activity in a Texan county. Also, foreign citizens who are looking for a new job opportunity to ease the federal and state taxes in the United States. Check out the following tax benefits:
- No state income tax: Neither for businesses nor individuals, which means a significant annual saving.
- Enterprise zones: Businesses located in these zones can access tax credits and sales tax rebates in exchange for investing and creating jobs.
- Property tax exemptions: Seniors over 65, disabled veterans, and homeowners with primary residences (homesteads) can apply for reductions or freezes on property taxes.
- State incentive programs: There are grants for large businesses that relocate or create jobs in the state.
Frequently Asked Questions About Taxes in Texas
No, it is one of the few states in the US that does not charge this state tax, only locally.
Residents in this state must pay local property taxes, calculated based on the home’s appraisal value.
No, this state does not apply state taxes on inheritance or estates.
Nomads who work for a company outside of Texas but reside in the state won’t pay state income tax. They only need to pay federal taxes and local sales or property taxes if applicable.
Yes, Texas has several tax incentive programs such as the Texas Enterprise Fund, offering grants to large companies that create jobs and investment.
