Retiring in Texas: what taxes actually cost you
The short answer
On $80,000 of retirement income, Texas costs about $8,513 a year across state income, property and sales tax. That ranks 37 of 51, or $1,878 above the median state. Texas levies no state income tax, so property and sales tax are the whole bill.
Run it on your own numbers
The figures above use a reference profile. Change them and every number on this page moves, including the ranking.
How Texas treats retirement income
Texas levies no state income tax, so nothing you withdraw is taxed at the state level.
Social Security
Not taxed
Pension income
Not taxed
401(k) and IRA withdrawals
Not taxed
Capital gains
Not taxed
Property tax
Averages 1.8% of assessed value, so $7,200 a year on a $400K home.
Sales tax
State rate of 6.25%, before any local addition.
Worth knowing: No state income tax. High property taxes.
Where Texas sits against the rest
The spread across all 51 runs from $3,280 in Wyoming to $14,004 in Connecticut, a difference of $10,724 a year on the same income.
Five cheapest on these numbers
| State | Total tax |
|---|---|
| Wyoming | $3,280 |
| Nevada | $3,639 |
| Colorado | $4,009 |
| Tennessee | $4,310 |
| Louisiana | $4,678 |
Five most expensive on these numbers
| State | Total tax |
|---|---|
| Connecticut | $14,004 |
| New Jersey | $12,953 |
| Vermont | $12,755 |
| Kansas | $11,108 |
| Minnesota | $10,888 |
Worth keeping in proportion. The gap between the best and worst state here is real money, but it is smaller than the gap between two housing markets, and it is far smaller than the effect of your withdrawal rate. Safe withdrawal rate covers that one.
Common questions
Does Texas tax Social Security?
No. Texas does not tax Social Security benefits at the state level. Federal tax on benefits still applies depending on your combined income.
How much tax would a retiree pay in Texas?
On $80,000 of retirement income with a $400,000 home and $70,000 of annual spending, Texas works out at roughly $8,513 a year across income, property and sales tax. That ranks 37 of 51, against a median of $6,635.
Does Texas tax 401(k) and IRA withdrawals?
No. Withdrawals from 401(k)s and IRAs are not taxed by Texas.
Is Texas a good state to retire in for taxes?
More expensive than most states. On the reference profile it costs $1,878 more than the median state, and $5,233 more than Wyoming, which is the cheapest. Tax is one input though. Cost of living, housing and proximity to family usually move a retirement budget further than the tax code does.
Retirement taxes in another state
Related: Taxes in retirement, Withdrawal order, Roth conversions, All 51 states.