Texas Taxes Explained: What Residents & Businesses Need to Know

Texas is often promoted as a low-tax state due to the absence of a personal income tax. However, Texas generates revenue through other forms of taxation that can significantly impact individuals, homeowners, and business owners.

Does Texas Have a State Income Tax?

Texas does not impose a state income tax on individuals or traditional corporate income. Residents do not file a Texas income tax return, and employers do not withhold state income tax from wages.

🤠 New to Texas? Tax Checklist

If you recently moved here, ensure you check these boxes to establish residency and avoid tax leaks.

Texas Sales & Use Tax

Texas relies heavily on sales tax to fund public services. The statewide sales tax rate is 6.25%, with additional local taxes imposed by cities, counties, and special districts.

Texas Property Tax

Texas has one of the highest effective property tax rates in the United States. Property taxes are assessed and collected at the local level by counties, school districts, and special taxing authorities.

Homestead Exemptions

Primary residences may qualify for homestead exemptions that reduce taxable value. Seniors, disabled homeowners, and veterans may qualify for additional reductions.

Texas Franchise Tax (Business Tax)

Texas imposes a franchise tax on many business entities operating in the state. This is not an income tax, but a privilege tax for doing business in Texas.

📅 Key Texas Tax Deadlines

Missing these dates can lead to penalties, interest, or forfeiture of your business entity.

Federal Deductions for Texas Taxes

Even without a state income tax, Texas taxpayers may still deduct certain state and local taxes on their federal return if they itemize deductions.

• Property taxes (subject to SALT limits)
• Sales tax deduction (instead of income tax)

We Handle Everything for Texas Taxpayers

Whether you need a simple 1040, a complex business return, or just advice on your franchise tax — we've got you covered. No matter your situation, our CPA team does the heavy lifting.

• ✔️ Federal 1040 preparation (Basic, Standard, Complex)
• ✔️ Texas franchise tax reports (No Tax Due or full payment)
• ✔️ Sales tax registration and filing guidance
• ✔️ Property tax protest strategy & documentation help
• ✔️ Homestead exemption application assistance
• ✔️ Multi‑state returns for Texas residents with out‑of‑state income
• ✔️ Small business accounting & bookkeeping
• ✔️ IRS audit representation & penalty abatement
• ✔️ Prior‑year catch‑up & amended returns
• ✔️ Secure encrypted document uploads
• ✔️ Direct CPA review before e‑filing
• ✔️ Year‑round support, not just tax season

DIY vs. Yellow Business Services

Filing on your own might feel cheaper — until a mistake triggers penalties or you miss out on a deduction worth thousands. Here's how we compare.

Feature	Yellow Business Services	DIY / Generic Software
Texas Franchise Tax Filing	✔ Included for business clients	✘ Often missed; $50 penalty
Homestead Exemption	✔ We guide you through the application	✘ Not addressed by tax software
Sales Tax Compliance	✔ Registration & rate review	✘ No support; you're on your own
Property Tax Protest	✔ Strategy & evidence preparation	✘ Not a feature
CPA Review	✔ Every return signed by a CPA	✘ None
Cost	$99 – $199+	$0 – $200+ (plus costly mistakes)

Why Texas Chooses Yellow Business Services

How We Help Texas Taxpayers

Transparent Pricing for Texas Taxpayers

Flat fees, CPA‑reviewed. No surprises.

Financial hardship? Mention “financial hardship” and we may reduce your rate to as low as $49 for simple returns.

Frequently Asked Questions

Does Texas tax Social Security or Pensions?

No. Texas has no personal income tax, so Social Security benefits, pension income, and 401(k) withdrawals are not taxed at the state level.

Do I need to file a tax return if I made money in Texas?

Individuals do not file a state return. However, if you have a business entity (LLC, Corp), you likely need to file a Texas Franchise Tax report by May 15.

How do I fight high property taxes?

You must file a protest with your county appraisal district (e.g., HCAD, DCAD) typically by May 15. We recommend hiring a property tax protest service or consulting our tax professionals if you are unsure how to present evidence.

What is the sales tax rate for online purchases?

If you live in Texas, online sellers with a presence in Texas (or significant sales volume) must collect Texas sales tax based on the delivery address rate (usually between 6.25% and 8.25%).

What is a homestead exemption and how do I apply?

A homestead exemption reduces the taxable value of your primary residence. You can file an application with your county appraisal district. The deadline is typically April 30. Once approved, it also caps annual taxable value increases at 10%.

Can I deduct Texas sales tax on my federal return?

Yes, if you itemize deductions, you can choose to deduct either state and local income taxes or state and local sales taxes. Since Texas has no income tax, the sales tax deduction is often advantageous. You can use the IRS sales tax deduction calculator or save receipts.

What happens if I miss the franchise tax filing deadline?

Late franchise tax reports incur a $50 penalty per report, plus interest on any tax due. Continued failure to file can lead to forfeiture of your business entity, meaning you lose legal protection for your LLC or corporation.

Request a Free Texas Tax Review

No obligation. Nothing is filed without your written approval.