Does Texas Tax Retirement Income? What Retirees Keep in 2026

Does Texas tax retirement income? No, and it never has.

The state collects no personal income tax at all, so pensions, 401(k) withdrawals, IRA money, annuities, and Social Security checks land in your account with nothing shaved off for Austin.

Texas charges no estate tax and no inheritance tax either.

Texans wrote that ban into the state constitution in 2019, when 74% of voters approved Proposition 4.

But here’s the part that trips retirees up: What the state gives up on your income, your county, your city, and your school district collect on your house instead.

Note: This is general information, not financial or tax advice. Tax rules, exemption amounts, and dollar figures are subject to change, so confirm the current details with a professional.

Does Texas Tax Retirement Income From Pensions?

Retirees moving to Texas ask that question first, and the answer holds no matter where the money comes from.

A Teacher Retirement System of Texas check, military retired pay, a refinery pension, an annuity, a plain 401(k) withdrawal: None of it lands on a Texas return, since Texans never file one.

No state return at all.

So there’s no state form to hunt down in April and no state credit to claim.

Nobody in Austin counts what you pulled out of savings last year.

Anyone comparing notes across state lines hears the same answer in Tennessee, while Virginia taxes the same pension and hands part of it back through an age deduction.

The constitutional ban also means the legislature can’t add an income tax on its own.

Undoing it would take a two-thirds vote in both chambers plus a statewide election.

What Texas Taxes Instead

Texas retirees keep every dollar of that retirement income.

Then they meet the property tax.

Property taxes bring in 40.7% of every state and local tax dollar collected in Texas, the Tax Foundation reports, against about 29% nationally.

Sales taxes cover another 37.7%.

Income taxes raise nothing at all.

Austin doesn’t collect a cent of that property money, though.

The state never mails a property tax bill.

Texans repealed the statewide property tax in 1982, so local governments assess and collect every dollar of it instead.

Your school district sets a rate.

So do your county, your city, your hospital district, and your community college district.

Stack those rates together and you have your bill.

That’s why two homeowners 20 minutes apart on I-35 can open envelopes that look like they came from different states.

Across all those local units, the effective rate on an owner-occupied Texas home lands at 1.40%.

Sales tax fills the rest, at 6.25% from the state plus local add-ons that lift the average to 8.19%.

Groceries and prescription drugs sit outside that entirely.

So a retiree filling more prescriptions than shopping carts feels that 8.19% far less than the number suggests.

No Annual Car Tax

Texas retirees also stop paying a tax they handed over every year in the state they left.

Texas charges no yearly property tax on a car you own for personal use.

Newcomers rarely believe it.

Retirees arriving from Virginia or Missouri, where a county mails a car tax notice every single year, usually spot the gap in their first winter.

Texas collects sales tax once at the dealership, then a registration fee after that.

So a paid-off pickup in Lubbock costs its owner nothing in property tax, however long they keep it on the road.

Your Property Tax Bill After 65

Turning 65 moves the Texas tax math further than any other birthday.

A homestead exemption is a slice of your home’s value that a taxing unit isn’t allowed to tax at all.

Say your house appraises at $300,000 and your school district has to ignore $140,000 of that.

Your district then figures your school taxes as if the house were worth $160,000.

Every Texas homeowner with a residence homestead exemption now takes $140,000 off that school value, up from $100,000 before voters approved Proposition 13 in November 2025.

Homeowners 65 and older stack another $60,000 on top of that through Proposition 11, which passed the same night with 77.7% of the vote.

That totals $200,000.

On a house appraised at $190,000, that wipes out the school district’s operating tax.

Lt. Gov. Dan Patrick argued the average senior homeowner would never pay a school property tax again.

The Austin American-Statesman editorial board put it more carefully, figuring more than 65% of senior and disabled homeowners would owe the schools nothing once both measures passed.

One caveat: A district that already pledged property tax revenue to pay off bonds can keep collecting on that exempted value until the debt is retired.

City, county, and hospital district taxes don’t vanish along with the school portion either.

Wiping out property taxes across Texas would have cost the state $81.5 billion in tax year 2023, state budget officials told a Texas Senate committee.

School districts accounted for $39.5 billion of that.

Your School Tax Ceiling

The over-65 exemption carries a second piece that Texas retirees overlook far more often than the exemption.

It's a freeze.

Once you qualify, your school taxes can never run higher than the amount you paid in the year you qualified, whatever your appraisal district does with the value afterward.

The ceiling can fall in a good year.

It only rises if you add something like a garage or an extra room, per the Travis County Tax Office.

The ceiling travels, too, though not the way most people picture it.

What moves to your next Texas house is the percentage it knocks off your school taxes, never the dollar figure you were paying.

So a couple whose ceiling cut their Katy school taxes in half carries that same 50% cut to Fredericksburg, applied to the new home's numbers.

Ask your old appraisal district for the certificate, then hand it to your new district.

A separate rule caps how fast the appraised value of a homestead can rise.

Your appraisal district can add no more than 10% a year to that taxable value, plus whatever new construction is worth.

So a $300,000 homestead can be taxed on no more than $330,000 the next year, even if similar houses on your street sold for far more.

All of it starts with paperwork you file once, free, with your county appraisal district on Form 50-114.

Miss the protest window and you wait a year, since the deadline in most Texas counties is May 15 or 30 days after your notice of appraised value arrives, whichever comes later.

You Can Postpone the Bill Entirely

Texans 65 and older have another move on the property tax.

Hardly anyone uses it.

File a tax deferral affidavit and you can stop paying property taxes on your homestead for as long as you live in it.

Your county can't sue you or sell the house while that affidavit stands.

That county still adds 5% interest a year to the unpaid balance, the Travis County Tax Office explains.

The whole amount comes due when the home sells or passes to your heirs.

The deferral doesn't erase a dime of the tax.

It moves the due date and nothing else.

Heirs get 180 days to settle up once the home stops qualifying.

Homeowners who'd rather chip away at the bill get a smaller version of the same break.

Texas Tax Code Section 31.031 lets homestead owners who are 65 or older, disabled, or disabled veterans split a year's taxes into four equal installments with no penalty and no interest.

Everyone else pays the whole thing by January 31.

What Home Insurance Costs Now

Property taxes get all the complaining in Texas.

They aren't the line rising fastest on a retiree's budget.

The median Texas homeowner paid 60% more for coverage in 2024 than in 2019, the Federal Reserve Bank of Dallas found, while the national increase was 30%.

Texas ran at double the national pace.

That lands hardest on Texans who own their home outright, the group many retirees end up in, since insurance now takes 14.9% of their total housing costs.

There's no mortgage payment in front of it to make that share look small.

The steepest year was 2024, when Texas homeowners insurance rates rose 18.7%.

The increases have slowed since.

Rates rose 4.3% in 2025, the Dallas Fed reported from Texas Department of Insurance figures.

Where you settle changes that premium more than what you paid for the house.

Amarillo and the Dallas-Fort Worth metros carry the heaviest insurance burden of any Texas metro area.

Hail and wind explain both.

Texas counted 20 billion-dollar disasters in 2024, up from eight in 2017.

Panhandle wildfires alone burned more than a million acres that year.

Bills Texas Can't Erase

Texas leaves your retirement income alone.

The federal government still wants its cut.

Combined income is what decides how much of your Social Security lands on your federal return.

It's your adjusted gross income, plus any tax-free interest, plus half of your benefits.

Cross $25,000 of it as a single filer or $32,000 as a couple, and part of those benefits becomes taxable.

Pass $34,000 or $44,000 and up to 85% of them count as income.

Required minimum distributions (RMDs) from a traditional IRA or 401(k) begin at 73.

Both rules land in Abilene exactly the way they land in Milwaukee.

Texas can't help there.

One break is worth claiming, though: Anyone 65 or older can take an extra $6,000 deduction for tax years 2025 through 2028, or $12,000 when both spouses qualify.

It starts shrinking above $75,000 of modified adjusted gross income for a single filer, or $150,000 for a couple filing jointly.

Modified adjusted gross income is your adjusted gross income with a handful of write-offs added back in.

For most retirees the two numbers match.

A single filer at $100,000 sits $25,000 over the line, which trims that $6,000 deduction to about $4,500.

Texas public retirees picked up a second break in 2025.

The Social Security Fairness Act ended the Windfall Elimination Provision and the Government Pension Offset, the two rules that had cut or wiped out benefits for more than 2.8 million people drawing a pension from work that never paid into Social Security.

Many Texas school districts sit outside the Social Security system, so retired teachers across the state opened notices in 2025 telling them their checks had gone up.

FAQ

Quick answers to the questions Texas retirees ask most about what the state taxes and what it leaves alone.

Does Texas Tax Retirement Income?

No. Texas has no personal income tax, so pensions, 401(k) and IRA withdrawals, annuities, and Social Security benefits all escape state tax. Federal tax can still apply.

Does Texas Tax Social Security Benefits?

No. Texas doesn't tax Social Security at the state level. The federal government can still tax up to 85% of your benefits once your combined income passes certain thresholds.

What Is the Texas Homestead Exemption for Seniors in 2026?

Homeowners 65 and older get the $140,000 general school district exemption plus an extra $60,000, for $200,000 off the value their school district can tax. Cities, counties, and other taxing units may add exemptions of their own.

Do Texas Property Taxes Freeze at 65?

School taxes do. Once you take the over-65 homestead exemption, your school tax bill can't rise above the amount you paid in the year you qualified. Moving carries the percentage that ceiling cuts off your school taxes, not the dollar amount, to your next Texas home.

Does Texas Have an Estate or Inheritance Tax?

No. Texas has neither. A large enough estate can still owe federal estate tax.