Texas taxes. Let's make them make sense.
You've probably heard that Texas doesn't have a state income tax. True. But that doesn't mean Texans don't pay taxes. Here's where your money actually goes.
Texas has no individual state income tax.
Texas does not impose a tax on the net income of individuals. So unlike residents of many other states, Texans don't file a Texas individual income tax return.
Federal income tax.
Moving to Texas doesn't remove your federal tax obligations. Federal income tax, Social Security and Medicare rules still apply just as they did before you moved.
You'll notice taxes when you buy things.
Texas has a 6.25% state sales and use tax. Cities, counties, transit authorities and other local taxing jurisdictions can add local taxes too.
Your sales tax rate can vary.
The state portion stays the same, but the local portion depends on the taxing jurisdictions that apply where the transaction takes place.
That means two places in Texas don't necessarily have the exact same combined sales tax rate.
Texas has no state property tax. But you can still get a property tax bill.
That's because property taxes in Texas are local. Local taxing units set their tax rates and collect property taxes to fund things like schools, roads, police and fire protection.
Value × tax rates = the basic idea.
Your county appraisal district determines the appraised value of taxable property. Local taxing units adopt tax rates.
Your eventual property tax bill reflects the taxable value of your property after applicable exemptions and the rates imposed by the taxing units that apply to your property.
Learn two words: homestead exemption.
If you own a home and use it as your principal residence, you may qualify for a Texas residence homestead exemption. An exemption removes part of the home's value from taxation for qualifying taxing units.
For school district taxes, the general residence homestead exemption is currently $140,000. Some local taxing units may offer additional exemptions.
You don't get the property tax bill.
If you're renting a home or apartment, the property owner is generally the person responsible for the property's tax bill.
That doesn't mean property taxes are economically irrelevant to renters. A landlord's property taxes are one of the costs associated with owning and operating a rental property.
That's a different conversation.
Texas doesn't impose a traditional corporate income tax, but certain businesses can be subject to the Texas franchise tax and may have sales tax, employment tax and other obligations.
If you're moving or starting a business in Texas, don't assume the phrase “no income tax” means “no business taxes.”
Texas taxes at a glance.
If you remember nothing else from this page, remember these.
New Texas home? Let's talk insurance.
Property taxes aren't the only number worth understanding before buying a home. Hey Charley can help you look at your insurance options too.
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