Texas is one of nine states with no personal income tax, which changes how retirement withdrawals, pensions, and Social Security are taxed at the state level. Property taxes run higher than the national average, and the tradeoff between the two is one of the first things to understand before building a Texas-specific retirement plan.
Does Texas Tax Retirement Income?
Texas has no state income tax on any personal income, and that includes retirement income. Withdrawals from a 401(k) or IRA, pension payments, and Social Security benefits are all free of state tax in Texas, because there is no state income tax return to file in the first place.
That protection sits in the Texas Constitution, not just in current policy. Voters approved Proposition 4 in 2019, adding Article 8, Section 24-a, which bars the legislature from taxing the net income of individuals. Undoing it would take another constitutional amendment and another statewide vote, not a single legislative session. According to the Tax Foundation's 2026 State Tax Competitiveness Index, Texas ranks 7th overall among all states, in large part because of this.
None of this makes Texas a low-tax state across the board. The state leans on sales tax and property tax instead, and property tax is where most Texas retirees feel it.
What About Property Taxes in Retirement?
Texas has no state-level property tax. Property tax is set and collected entirely by local taxing units, school districts, cities, counties, and special districts, not by the state itself. But the average effective property tax rate on an owner-occupied home is 1.40%, according to the Tax Foundation, which is higher than most other states.
Texas also builds in real relief for homeowners, especially those 65 and older. School districts must apply a $140,000 homestead exemption on a primary residence, and homeowners 65 or older get an additional $60,000 exemption on top of that, a combined $200,000, after voters approved Propositions 11 and 13 in the November 2025 election. Once a homeowner qualifies for the over-65 exemption, Texas Tax Code Section 11.26 also caps future school district taxes at that first qualifying year's dollar amount, so a rising home value alone can't push that portion of the tax bill higher.
None of this erases property tax. County, city, and other local rates still apply on top of the school district piece. It does mean the real math, after exemptions and the age-65 ceiling, tends to look better for a long-term homeowner than the headline 1.40% rate suggests on its own.
Does Texas Have an Estate or Inheritance Tax?
No. Texas repealed its state inheritance tax effective September 1, 2015, under Senate Bill 752 from the 84th Legislature, and the state has never had a separate estate tax. An estate settled in Texas owes the state nothing, regardless of size.
Federal estate tax can still apply no matter which state someone lives in. Under the One Big Beautiful Bill Act, the IRS set the 2026 federal estate and gift tax exemption at $15 million per person, or $30 million for a married couple. Estates below that amount owe no federal estate tax; only the amount above it is taxed. For most households, Texas simply not having its own version of this tax is the more relevant fact day to day.
How These Factors Fit Into Retirement Income Planning
Taken together, these rules change what actually matters when planning retirement income in Texas. Because there is no state income tax, the state treats a traditional IRA withdrawal, a Roth withdrawal, a pension payment, and Social Security the same: none of it is taxed at the state level. Federal tax still applies differently across those account types, so the state-level picture and the federal-level picture are not the same conversation.
Higher property tax is the flip side. It is a fixed yearly cost in retirement, not something tied to income, and it does not shrink just because paychecks stop. A retirement income plan built around Texas numbers has to account for that property tax line every year, offset in part by the homestead exemptions and the over-65 tax ceiling described above.
This page describes how Texas's tax rules work in general. It is not a recommendation for any individual's account structure, withdrawal order, or filing status, and it does not replace running the actual numbers with a professional, including through tools like a retirement savings calculator.
Common Questions About Retiring in Texas
Is Social Security taxed in Texas?
No. Texas has no state income tax, so Social Security benefits are not taxed at the state level. Social Security may still be partly taxable on a federal return, depending on total household income.
Do retirees over 65 get a property tax break in Texas?
Yes. Homeowners 65 and older qualify for an additional $60,000 school district homestead exemption on top of the standard $140,000 exemption, and their school district taxes are capped at the dollar amount owed in the first qualifying year under Texas Tax Code Section 11.26.
Does Texas tax pensions or 401(k) withdrawals?
No. Because Texas has no personal income tax, pension income and retirement account withdrawals are not taxed at the state level, though federal tax rules still apply to both.
Talk to a Licensed Financial Advisor About Your Texas Plan
The tax rules above apply the same way to every Texas resident. What doesn't apply the same way is any individual's account mix, income sources, and property situation. A licensed financial advisor familiar with Texas can help map these state-level factors against an actual plan, instead of relying on general rules of thumb. Weighing Texas against another no-income-tax state? See how the rules compare on our retirement planning in Florida page.