It is true and it matters: Texas does not tax wages, salaries, self-employment income or investment income at the state level. There is no state return to file in April. For people arriving in Midland from New Mexico, Oklahoma, California or almost anywhere else, that is a real change in take-home pay. It also leads to a mistaken belief that the state collects nothing. Texas collects plenty; it just does it through other doors.
Federal tax does not change
Your federal return is exactly the same in Texas as anywhere else. Income tax, self-employment tax, the credits and the deadlines all apply. The one federal wrinkle is that residents of states with no income tax may choose to deduct state sales tax instead of state income tax if they itemize, which occasionally helps someone who bought a vehicle or made other large taxable purchases in the year.
What Texas taxes instead
- Property tax. This is the big one. Local taxing units, the county, the city, the school district, the hospital district and the college district, each set a rate on the appraised value of your home or business property. Rates in Midland County are set locally and the appraisal district values property each year. Homeowners should file for the homestead exemption, which lowers the taxable value and caps how fast it can rise.
- Sales and use tax. The state rate plus local rates apply to most goods and some services at the register. Businesses that sell taxable items collect it and remit it to the Comptroller.
- Franchise tax on registered entities, discussed in our separate guide. Most small businesses owe nothing but still file.
- Motor vehicle sales tax when you buy a vehicle, paid at title transfer, plus annual registration.
- Fuel taxes, hotel occupancy tax, and various fees that show up on specific transactions.
If you work across the state line
Living in Texas does not exempt you from another state's income tax on money earned there. Oilfield crews working in New Mexico, drivers running loads through Oklahoma and Louisiana, and remote employees of companies in other states can all owe a nonresident return to that state for the income sourced there. Texas will not give you a credit for it, because Texas has nothing to credit against. Bring pay stubs or a log showing where the work happened.
Moving to Texas mid-year means a part-year return for the state you left, covering the months you lived there. Do not skip it; the old state will notice the missing return long before it notices you moved.
For a business, it changes the checklist
- 01No state income tax withholding from employee paychecks, and no state W-4. Federal withholding only.
- 02State unemployment tax through the Texas Workforce Commission still applies to every employer.
- 03A sales tax permit from the Comptroller if you sell taxable goods or services, with returns due monthly, quarterly or yearly depending on volume.
- 04The annual franchise tax information report for any LLC or corporation.
- 05Business personal property renditions to the appraisal district for equipment, inventory and vehicles used in the business.
Frequently asked questions
I retired to Midland. Is my pension taxed by Texas?
No. Texas does not tax pensions, Social Security, retirement account withdrawals or any other income. Federal tax on those still applies.
How do I lower my property tax?
File for every exemption you qualify for with the Midland Central Appraisal District, starting with the homestead exemption, and protest the appraised value if it is above what the property would sell for. Both have deadlines each spring.
Does my business need to collect sales tax on services?
Some services are taxable in Texas and many are not. It depends on the specific service, and it is worth checking before you send the first invoice rather than after an audit.
New to Texas? Come in once
One conversation sorts out what applies to your household or your business. Call (432) 257-7547 or come by 700 C Andrews Hwy in Midland. English and Spanish.
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