Retiring in Texas: No Income Tax, and the 37th Cheapest State to Retire In

Texas has no income tax, and since 2019 it has had something stronger: a constitutional prohibition on the legislature ever creating one.

For a retiree drawing down a large pre-tax balance that is worth a great deal, and it is permanent in a way a statute is not.

Then the property tax bill arrives. Texas has an effective property tax rate of 1.4% — one of the highest in the country — and average home insurance of $4,915. Put the three lines together and Texas comes 37th of 50 on what retiring there actually costs.

A note before you start. This is general education, not tax advice. Every state figure comes from this site's own fifty-state income-tax dataset and its retirement tax engine, computed for a single filer aged 70 unless stated otherwise; property tax, median home price and insurance figures come from the site's core state dataset. Rates are for tax year 2026. Property tax in Texas is assessed and levied locally and varies widely inside the state, so the effective rate here is a statewide figure and not a substitute for your own county's.

1. What Texas takes from retirement income

Nothing, on any stream, at any age, at any income.

All five are $0 for one structural reason. Texas has no individual income tax, so it never draws the distinctions most states spend pages on — no exclusion amount, no age gate, no income ceiling, no separate treatment of a government pension against a private one.

There is also no state estate or inheritance tax, and no state tax on capital gains. That last point separates Texas from Washington, the other large no-income-tax state, which does charge an excise on large individual long-term gains.

2. The constitutional bar, and why it is stronger than the usual one

Article VIII, Section 24-a of the Texas Constitution, added by voters in November 2019, forbids the legislature from imposing an individual income tax.

Most state tax advantages rest on statute, and a statute is one session away from changing — several states have cut or expanded retirement exemptions in the past three years alone. A constitutional prohibition requires a constitutional amendment, which in Texas means a legislative supermajority and a public vote.

That is worth counting in a thirty-year retirement plan. Someone relocating in their sixties is making a bet on what a state will do for the rest of their life, and Texas offers more certainty on this specific point than almost anywhere.

It is also narrow. The bar covers an individual income tax. It says nothing about property tax, sales tax, or the local rates that make up most of what a Texas retiree actually pays — and those are exactly where the cost is.

3. What the drawdown saves

The exemption is worth most to people with the largest pre-tax balances, because it applies to the whole withdrawal rather than to a capped exclusion.

A $100,000 IRA withdrawal that costs roughly $9,300 in California state tax costs nothing in Texas. For someone converting a large traditional balance to Roth, or clearing an inherited IRA inside its ten-year deadline, that is the entire argument for the state.

On the ordinary retirement profile the saving is smaller. A single filer with $34,000 of Social Security and $61,000 of distributions pays around $2,800 in the median taxing state. Hold that figure — the next two sections measure against it.

4. Property tax is the real Texas tax

An effective rate of 1.4% on the state's $345,000 median home is about $4,830 a year.

Texas funds through property what most states fund through income, and for a retiree that trade is often worse rather than better — because property tax is assessed on the house rather than on the income, and a retiree's income falls while the house does not.

Two things make this heavier than the number suggests. It is levied locally, so the statewide effective rate conceals real variation — a retiree in one county can pay considerably more than one an hour away. And it rises with assessed value, which means a rising market raises the bill of someone whose income is fixed.

5. Insurance, the line nobody prices

Average home insurance in Texas: $4,915 a year.

That is roughly three times Washington's $1,650, and among the highest in the country outside Florida. Hail, wind and severe convective storms drive it, and it has been rising faster than general inflation for years.

For a retiree this behaves like a second property tax. It is a condition of a mortgage if you have one, it rises independently of income, and it is not a cost you can opt out of by economising.

6. What retiring in Texas actually costs

Put the three lines together and compare against the states people actually leave — and against the other no-income-tax states, which is where the surprise is.

State income tax on the typical retirement profile, plus property tax and insurance on each state's own median home:

Texas ranks 37th of 50. It is more expensive on these three lines than Ohio, Pennsylvania, Michigan and Illinois — every one of which taxes something Texas does not.

And the no-income-tax states do not belong in one group. Wyoming comes to $3,983 and Nevada to $4,514, less than half of Texas. Whatever "no income tax" is worth, it is clearly not the thing that decides the total.

One large caveat, and it matters. Each row uses that state's own median home, and those differ — Ohio's is $245,500, Texas's is $345,000. So this compares the typical house in each state, not the same house in each state. Buying in Texas at an Ohio price point improves the arithmetic materially.

7. "No income tax" tells you almost nothing

Nine states charge no individual income tax. If that were the thing that decided the cost of retiring somewhere, those nine would cluster together. They do not — they span from first to forty-fifth.

The spread is $7,707, or 2.9 times, between states with an identical income tax rate of zero.

Wyoming and Texas are the same on the line everybody checks and $5,762 apart on the total. Whatever "no income tax" is worth, it is not what decides this.

Two different things drive the bottom of that table. New Hampshire is expensive because of property tax — 1.48%, the highest rate in the group, on a $574,200 median home. Florida is expensive because of insurance, at $8,375. Texas is unusual in being above average on both: 1.4% property tax and $4,915 insurance, which is why it sits where it does.

The useful reading is that "no income tax" is a category, not a recommendation. It tells you one line of three is zero. It tells you nothing about the other two, and for a homeowner those two are usually larger.

8. The exemptions that change your number

The $4,830 figure above is before the exemptions a Texas homeowner over 65 can claim, and those are substantial enough that the headline rate materially overstates what many retirees pay.

The general residence homestead exemption removes a portion of the home's value from school-district taxation for an owner-occupied primary residence.

The over-65 exemption adds to it, and comes with the provision that matters most: a ceiling on school district taxes. Once it applies, the school-tax portion of the bill is frozen at that year's level for as long as you own and occupy the home, regardless of later increases in assessed value or rate. School taxes are typically the largest component of a Texas property tax bill.

These must be applied for, at the county appraisal district. They are not applied automatically on turning 65, and the deadline is annual.

There is also a tax-deferral option allowing an owner over 65 to postpone payment on a homestead. Interest accrues and the deferred amount becomes a lien, so it is a cash-flow tool rather than a saving — but it exists, and it is the reason some Texans over 65 pay very little property tax in practice.

9. What Texas does not exempt you from

The federal system, entirely. This is the most common misunderstanding about no-income-tax states.

Required minimum distributions still apply. The amount is a federal calculation — your prior-year balance divided by an IRS life expectancy factor — and it is identical in all fifty states. Texas changes what the distribution costs you, not whether you must take it.

Social Security is still federally taxable, on the federal provisional-income calculation. Moving to Texas does not change it.

IRMAA still applies with its two-year lag. A large conversion raises a Medicare premium two years later regardless of address.

And capital gains are still federally taxed. Texas adds nothing on top, which is a genuine advantage over Washington — but the federal bill is unchanged.

10. What the flat zero is worth if your pension is the wrong kind

Most states that exempt retirement income do not exempt all of it equally. They distinguish by source, and the distinctions are worth real money to the people on the wrong side of them.

The same $50,000 pension, taxed by source, in the states that differentiate most:

Read the first column. In Massachusetts, Hawaii and Kansas a government pension is exempt and an identical private one is not. Someone who spent a career at a private employer is taxed on income their neighbour who worked for the state receives free.

Fourteen states exempt military retired pay while taxing a private pension of the same size. If your retirement income is a private employer pension, you are the category most states are least generous to — and Texas's flat zero is worth more to you than to almost anyone else.

This is the case where "no income tax" genuinely beats "generous exemptions." A state with a large retirement exclusion may still exclude only your neighbour's kind of income. Texas draws no distinction because it has no tax in which to draw one.

11. Establishing that you actually live here

The exemption is worth nothing until Texas is your domicile, and the state you left may disagree about when that happened.

High-tax states audit departing residents. The question is not whether you own a Texas home; it is whether you have genuinely abandoned the old domicile. Days in each state, voter registration, vehicle registration, where your doctors are, and where you claim a homestead all bear on it.

The Texas homestead exemption helps here, because claiming it is a formal assertion of permanent residence in a specific property, on a dated record.

The snowbird case is the risky one. Splitting the year between Texas and a northern state while keeping a home in both is precisely the profile a residency audit is built for. If the plan depends on the saving, count the days from year one rather than reconstructing them later.

12. Who Texas is actually best for

Someone drawing down a large pre-tax balance who rents, or buys modestly. The income tax saving scales with the withdrawal; the property tax and insurance are attached to the house. Separating those two is the whole game.

Someone with a large pension, especially military. Texas exempts all of it without condition, and a large military retirement community exists around the bases.

Someone over 65 who will stay in one home for a long time. The school-tax ceiling compounds in your favour the longer you hold, in a way that rewards not moving again.

It is a worse fit than advertised for someone buying a large home on a fixed income in a high-rate county — because that is the profile where 1.4% and $4,915 do the most damage, and where the income tax saving is least able to cover them.

13. What to check before you decide

Get your county's actual rate, not the state average. Texas property tax is local, and the spread inside the state is wide enough that a statewide figure is close to useless for one address.

Get a real insurance quote on a real address. $4,915 is the state average; hail exposure, roof age and construction move it a long way.

Confirm the over-65 exemption and school-tax ceiling apply to you, and apply for them. They are the difference between the headline property tax figure and what many Texas retirees actually pay.

And work out what your current state actually charges you rather than assuming it is worse. On these three lines, Ohio, Pennsylvania and Michigan are all cheaper than Texas.

Frequently asked questions

Does Texas tax Social Security? No, and it cannot. Texas has no individual income tax, and since 2019 the constitution has forbidden the legislature from creating one. Federal taxation of benefits is unaffected.

Does Texas tax 401(k) or IRA withdrawals? No, at any amount and any age. There is no exclusion cap, no age trigger and no income limit, because there is no tax for an exclusion to apply against.

What about military retired pay? Exempt, like every other retirement stream, for the same structural reason.

Does it matter whether my pension is private or government? Not in Texas — all three are $0. It matters a great deal elsewhere: Massachusetts, Hawaii and Kansas exempt a government pension entirely while taxing an identical private one, and fourteen states exempt military retired pay while taxing a private pension. A private-sector pension is the category most states treat least generously.

Could Texas introduce an income tax later? Not by ordinary legislation. Article VIII, Section 24-a, added by voters in November 2019, forbids it — changing that requires a constitutional amendment.

Is Texas actually cheap to retire in? On income tax, yes — it is one of nine states charging zero. On income tax plus property tax plus insurance it ranks 37th of 50, behind Ohio, Pennsylvania, Michigan and Illinois.

Are the other no-income-tax states similar? No, and that is the most useful thing in this article. The nine span from Wyoming at $3,983 to Florida at $11,690 — a 2.9-fold spread among states whose income tax rate is identically zero. Texas is 37th of the fifty and seventh of the nine.

Why is Texas property tax so high? Because it funds through property what most states fund partly through income. The trade is often worse for a retiree specifically, since property tax is levied on the house while retirement income falls.

Does the over-65 exemption really freeze my taxes? It places a ceiling on the school district portion — typically the largest part of the bill — for as long as you own and occupy the home. Other components can still rise. You must apply.

Is there an estate or inheritance tax? No state-level tax of either kind. The federal estate tax is unaffected.

Does Texas tax capital gains? No. This is a real difference from Washington, the other large no-income-tax state, which charges an excise on large individual long-term gains.

Do required minimum distributions change if I move here? No. The required amount is federal and identical in every state. What changes is that Texas takes nothing from it.

What to do next

Two numbers decide this, and neither is the income tax: your county's actual property tax rate, and a real insurance quote on a real address.

• Retirement state tax calculator — what any state charges on your income, cited per state
• RMD calculator — the distribution you must take, which no state changes
• Home insurance premium estimator — the second-largest line in this article
• The Relocation Tax Playbook — establishing domicile, and the states that contest it