Why don't Texans pay income taxes, and what do we pay? Here's what you should know

Ryan Maxin, Austin American-Statesman
·3 min read

Texas has a complicated relationship with taxes, despite their similar spellings. The state imposes no income tax on its residents but makes up the lost revenue in other ways, mainly through higher sales taxes.

The state's noteworthy tax system, coupled with the April 15 deadline to file federal income tax returns, can complicate people's understanding of the process. It certainly confused us.

But fear not; we did the research. Here's everything you need to know about Texas' taxation system ahead of the April deadline.

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Why don't Texans pay state income tax?

Texans can thank a provision in the state's constitution for not having to pay state income taxes. The provision explicitly prohibits personal income taxes, according to Melton & Melton, an accounting firm based in Houston.

Only eight other states join Texas in imposing no income tax on their residents, including:

  • Alaska

  • Florida

  • Nevada

  • New Hampshire

  • South Dakota

  • Tennessee

  • Washington

  • Wyoming

More: President Joe Biden distorts income tax rates for the richest Americans

What taxes do Texans pay?

The bulk of taxes paid by Texans come in the form of sales taxes. The state sales tax, which is 6.25%, can be grouped with local sales taxes to total as much as 8.25% in some areas, including Austin, Dallas, Houston and San Antonio, according to The Balance, a personal finance website.

Some businesses and specific industries are also taxed. Though Texans also pay property taxes, those are collected by local entities like cities, counties and school districts, not by the state.

The gas tax in Texas is 20 cents per gallon, and there's a $1.41 tax on each pack of cigarettes. Hotels, bed and breakfasts and other short-term stay facilities tax guests at 6% of the cost of the room.

What taxes don't Texans pay?

At the state level, in addition to their income, Texans have not been taxed on their inheritances — commonly referred to as "death taxes" — since 2015. There's also no estate tax in Texas, though estates valued at more than $12.06 million in 2022 and $12.92 million in 2023 can be taxed at the federal level, according to The Balance.

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Are sales taxes higher in Texas than other states?

Sort of, but not egregiously. In a 2021 ranking by the Tax Foundation, a nonpartisan, non-profit organization focused on shaping tax policy, Texas' average combined state and local sales tax of 8.19% ranked 14th highest in the country. States bordering Texas, including Louisiana, Arkansas and Oklahoma all ranked higher than Texas, meaning their state and local sales tax averages were higher than the Lone Star State.

Among the eight states that don't impose income taxes (excluding New Hampshire because of insufficient data), Texas ranked fourth in terms of highest average sales tax, with Tennessee (#1 overall), Washington (#4 overall) and Nevada (#13 overall) ranking higher, according to the report.

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When can I expect my tax return refund?

If you filed or plan to file online, you can expect your tax return refund 21 days after filing, according to the Internal Revenue Service.

If you filed by mail or your return had to be amended, the timeline to get your refund will likely be closer to a month.

This article originally appeared on Austin American-Statesman: Does Texas have state income tax? What to know as you file your taxes