Texas State Taxes 2025: Rates, Thresholds & Essential FAQs
Introduction
Texas has a unique tax landscape that differs significantly from many other states. As of 2025, Texas remains one of the few states that does not levy a state income tax, making it an attractive location for individuals and businesses. However, the state funds its services through other means, including sales tax, property tax, and franchise tax for businesses. Understanding these tax obligations is crucial for financial planning. This guide covers the key aspects of Texas state taxes for 2025, helping residents and business owners navigate their responsibilities. Learn more about Texas Business Taxes and Property Taxes.
Understanding Texas Sales Tax and Other Key Rates
Sales Tax
The Texas state sales tax rate remains at 6.25%. However, local jurisdictions (cities, counties, transit authorities, and special purpose districts) can add up to an additional 2%, making the maximum possible sales tax rate 8.25%.
Sales tax applies to most retail sales, leases, and rentals of goods, as well as taxable services.
To calculate sales tax on purchases, multiply the purchase price by the applicable tax rate. For example, a $100 purchase in an area with an 8.25% tax rate would incur $8.25 in sales tax.
Visit the Texas Comptroller’s Sales Tax Guide for more details.
Other Taxes
Property Tax: Texas has some of the highest property taxes in the U.S., as the state relies heavily on them for funding local services. Rates vary by county and are assessed based on property value. Learn more about property taxes here.
Franchise Tax: Texas imposes a franchise tax on certain businesses, though many small businesses qualify for exemptions. The franchise tax rate depends on revenue and business structure. Check out franchise tax rates.
No Tax Due Threshold for Texas 2025
The No Tax Due Threshold applies to Texas franchise taxes and determines whether a business is required to pay the tax. For 2025, businesses with total revenue below $1.23 million are not required to pay the franchise tax. However, they must still file a No Tax Due Report with the state. File your franchise tax report online.
Additional Franchise Tax Details
Businesses above the threshold but below $20 million in revenue can opt for the E-Z Computation Method, which simplifies tax calculations but disallows certain deductions.
The standard franchise tax rate is 0.375% for retail and wholesale businesses and 0.75% for other businesses.
Clarifying the State Tax Situation in Texas
State Income Tax
Texas does not have a state income tax, which benefits residents by reducing their overall tax burden and attracting businesses that prefer lower tax liabilities.
While Texas lacks a personal income tax, residents still pay federal income taxes and may be subject to other local levies.
Other Considerations
Some municipalities impose additional local taxes, such as hotel occupancy taxes or special district assessments.
Business owners should be aware of industry-specific tax obligations, such as fuel taxes or mixed beverage gross receipts taxes.
Taxes and Age Considerations
Tax Obligations for Seniors
There is no specific age at which individuals stop paying taxes in Texas.
However, seniors may qualify for property tax relief programs, such as the Over-65 Homestead Exemption, which provides a reduction in property tax bills.
Disabled individuals and veterans may also be eligible for additional exemptions or reductions. Read about senior tax exemptions.
Are Taxes High in Texas?
Texas' tax structure is often debated in comparison to other states. While there is no state income tax, other taxes contribute to the overall tax burden:
Sales tax rates are relatively high compared to some states without additional local sales tax.
Property taxes are among the highest in the U.S. due to the absence of state income tax.
Franchise tax applies to businesses but has generous exemptions for small businesses.
Despite these factors, many residents and businesses find Texas appealing due to its overall tax-friendly environment, especially when compared to high-income-tax states like California or New York.
Conclusion
Texas' tax structure remains unique in 2025, with no state income tax but relatively high property and sales taxes. Business owners should be aware of franchise tax obligations and the No Tax Due Threshold. While the state’s tax burden varies depending on individual circumstances, Texas continues to be an attractive option for many due to its favorable business climate and lack of personal income tax. Consulting a tax professional is recommended for personalized financial planning and compliance. Explore the Texas Taxpayer Resources for further information.
FAQs
1. What is the tax rate in Texas for 2025?
The state sales tax rate is 6.25%, with local jurisdictions potentially adding up to 2%, for a maximum of 8.25%. Check sales tax rates by location.
2. What is the no tax due threshold for Texas in 2025?
Businesses with total revenue below $1.23 million do not owe franchise tax but must file a No Tax Due Report. File your no tax due report.
3. Is Texas going to have a state income tax?
No, Texas does not have a state income tax and has no plans to implement one. Read about Texas tax policy.
4. At what age do you stop paying taxes in Texas?
There is no age at which taxes stop, but seniors may qualify for property tax exemptions and relief programs. Find out about senior tax exemptions.
5. Are taxes high in Texas?
While sales and property taxes are relatively high, the absence of a state income tax makes the overall tax burden competitive compared to other states.