Does Texas Tax Social Security?

No, Texas does not tax Social Security income, making it an attractive state for retirees. In fact, Texas has no state income tax at all, which means residents are not taxed on Social Security benefits, pensions, retirement account withdrawals, or wages at the state level.

Texas: A Tax-Friendly State for Retirees

For retirees, tax burdens can significantly impact their quality of life and financial stability. Texas stands out as one of the most tax-friendly states for retirees because it does not impose a state income tax, allowing residents to keep more of their retirement income. This includes:

  • Social Security benefits

  • Pensions (private and public)

  • 401(k) and IRA withdrawals

  • Wages and self-employment income

While the federal government may tax a portion of your Social Security benefits depending on your total income, Texas does not add any state-level tax on top of that. This can result in substantial savings over time, especially for those relying heavily on fixed retirement income.

Other Taxes in Texas

Although Texas doesn’t tax income, the state does rely on other forms of taxation to generate revenue:

  • Sales tax: The state sales tax rate is 6.25%, but local governments can add up to 2%, making the total sales tax rate as high as 8.25% in some areas.

  • Property tax: Texas has relatively high property taxes, which can affect homeowners. However, the state offers property tax exemptions for seniors (typically those over age 65), which can help reduce the financial impact.

  • No estate or inheritance tax: Texas also does not impose estate or inheritance taxes, which can be another advantage for retirees planning to pass on assets.

Final Thoughts

With no tax on Social Security and no state income tax, Texas remains a financially appealing choice for retirees. While it’s important to factor in other taxes like property and sales tax, the lack of income tax allows retirees to stretch their money further. Always consult with a financial advisor to understand your unique tax situation and how living in Texas can benefit your retirement plans.

George Dimov