Texas Paycheck Calculator Guide

Why Texas Has No Income Tax

Texas funds state government primarily through sales tax (6.25% state + up to 2% local = up to 8.25% total) and property taxes — which are among the highest in the nation. The Texas Constitution was amended in 1993 to require a two-thirds supermajority of the legislature and voter approval to enact an income tax, making one effectively impossible under current political conditions.

What Texas Workers DO Pay:

- Federal income tax (standard 2026 brackets)

- FICA (Social Security 6.2% + Medicare 1.45%)

- Property taxes if they own a home (average 1.7–2.3% of assessed value — some of the highest rates nationally)

- State and local sales taxes (up to 8.25%)

What Texas Workers Do NOT Pay:

- State income tax (zero)

- State capital gains tax (zero — no state-level capital gains tax)

- State estate or inheritance tax (zero)

Texas Take-Home Pay at Every Salary Level (2026)

The Hidden Tax: Texas Property Taxes

While Texas has no income tax, its property tax rates are among the highest in the country — averaging 1.7–2.3% of assessed value annually. For homeowners, this is a meaningful offset to the income tax savings:

- Median Texas home value (2026): ~$325,000

- At 1.8% property tax rate: $5,850/year ($488/month)

- In high-appreciation areas like Austin: median ~$550,000 → $9,900–$11,000/year

For renters, property taxes are effectively embedded in your rent — landlords factor their tax burden into pricing. For homeowners, this is the "price" of no income tax.

A California homeowner on a $150,000 salary pays $18,330 more in income tax than their Texas counterpart, but may pay less in property tax (California's Proposition 13 caps property tax increases for existing owners to 2% per year, often resulting in effective rates of 1.1–1.3% on long-held properties).

The honest Texas vs. California comparison requires adding up income tax + property tax + sales tax — not just income tax alone. The Texas total tax advantage is still very real at most income levels, but it's smaller than the income tax headline suggests.

Texas vs. California: The Full Picture at $100,000

Here's a side-by-side comparison for a $100,000 earner in Austin, TX vs. Los Angeles, CA in 2026:

| Item | Austin, TX | Los Angeles, CA |

|------|------------|-----------------|

| State income tax | $0 | $9,975/yr |

| Federal + FICA | $21,705 | $21,705 |

| Property tax (own home) | ~$7,000/yr | ~$4,500/yr |

| Median rent (1BR) | ~$16,800/yr | ~$24,000/yr |

| Sales tax (avg purchases) | ~$2,400/yr | ~$2,100/yr |

| Auto insurance | ~$1,800/yr | ~$2,400/yr |

Net in Austin after income taxes and rent: ~$40,000/yr

Net in LA after income taxes and rent: ~$20,700/yr

The Austin worker has nearly double the annual discretionary income of their LA counterpart on the same salary. That's the financial reality behind the California-to-Texas migration trend that's been playing out for the past decade.

Moving to Texas: What to Know for Your First Paycheck

If you've recently relocated to Texas from a state with income tax, here's what changes and what doesn't.

First Paycheck in Texas

No state income tax withholding line will appear. Your W-2 at year-end will have no state tax entry in Box 15. You will not file a Texas state income tax return.

Review Your W-4

If you've moved from a high-tax state, you may have previously set extra withholding on your W-4 line 4(c) to cover state taxes you were paying to another state. With no Texas income tax, that extra federal withholding may now be unnecessary. Submit a new W-4 to your Texas employer and review your withholding amounts.

The Part-Year Residency Issue

If you moved mid-year, your former state will typically want to tax income earned while you were a resident — even if you've since moved to Texas. Most states require a part-year resident return. Check the specific rules for your former state.

One Nuance Worth Knowing

Texas cities (Houston, Dallas, San Antonio, Austin) have no local income taxes. However, if your Texas-based job involves work for clients or employers in other states, those states may assert a tax claim on income sourced from their territory. Non-residents generally owe taxes to the state where work is performed, not where they live.

Frequently Asked Questions