Texas Retirement Income Tax 2026: No State Tax on RMDs, IRAs, and 401(k)s

Texas imposes no personal income tax under the Texas Constitution — and a 1993 voter-approved amendment made that permanent (any future income tax requires voter approval). A retiree taking $150,000 per year in traditional IRA distributions owes Texas $0 in state income tax. The same retiree in New York owes roughly $7,000–$8,500 in state tax after exclusions; in California, roughly $10,000–$12,000. Texas does have meaningfully higher property taxes than many retirement destinations — the average effective rate is about 1.36% versus Florida's ~0.85%. But for retirees with significant IRA balances, the income tax savings almost always exceed the property tax premium. Here is the full calculation.

What Texas retirement income costs vs. high-tax alternatives

The comparison below shows the same retirement income profile in Texas, New York, and California — three states that together account for a large share of interstate retirement relocations. Federal tax is identical for all three.

New York estimates use 2026 brackets after the $20,000/person private-pension exclusion and $16,050 MFJ standard deduction. California estimates use 2026 FTB-indexed brackets and $11,412 MFJ standard deduction. Federal taxes are identical at the same income level regardless of state.

Texas vs. New York tax savings calculator

Enter your retirement income to see your Texas state bill ($0) versus what the same income costs in New York — plus the property tax offset if you're comparing Austin or Dallas to a New York suburb. For a full 50-state comparison, use the all-50-states retirement income tax calculator.

The property tax trade-off — the real math

Texas has no state property tax. But local school districts, counties, cities, and special districts each set their own rates, and combined levies vary enormously. The statewide average effective rate is approximately 1.36% of assessed value — higher than Florida (~0.85%), Tennessee (~0.45%), and Nevada (~0.52%), but comparable to Illinois (~1.95%) or New Jersey (~2.2%) where retirees typically come from.²

For a retiree moving from California or New York:

• $350,000 home in Texas: ~$4,760/yr in property taxes on average. A comparable home in a New York suburb might pay 1.54% = ~$5,390/yr. Texas is cheaper here.
• $500,000 home in Texas: ~$6,800/yr. In suburban New York (Westchester, Nassau), effective rates often exceed 2% — $10,000+/yr on the same value.
• $600,000 home in Austin or Dallas vs. comparable Bay Area value: TX ~$8,160/yr vs. CA ~$6,000/yr (CA Prop 13 caps assessment growth). Here Texas loses on property tax. But the CA retiree is paying 9.3%+ income tax on the entire IRA distribution — $14,000+/yr on a $150K RMD. The income tax savings dwarf the property tax premium.

The break-even: Texas income tax savings for a retiree with $150,000/yr in RMDs from New York are roughly $7,100/yr. To erase that with higher Texas property taxes, you'd need to own a home where Texas property tax costs $7,100/yr more than New York property tax — which at the average effective rate differential (~0.18 percentage points less in TX than NY) means a $3.9M home. No retiree with a $150K RMD is in that situation.

The school tax freeze for ages 65 and older

Texas offers a particularly valuable benefit for retirees that many other no-income-tax states do not: the school district tax ceiling for homeowners age 65 or older.³

• How it works: Once you qualify (age 65 in a year you already own and occupy the property), your school district property taxes are frozen at that year's amount. Even if your home's appraised value rises dramatically, your school district tax bill cannot increase — as long as you don't make significant improvements to the home.
• School district portion of the total: School district taxes typically represent 40%–55% of total Texas property tax bills. Freezing that portion protects the majority of your property tax from inflation.
• Homestead exemption for all homeowners: A $100,000 school district homestead exemption (increased by Proposition 4, approved November 2023) reduces assessed value before the school district tax is applied. For a $400,000 home, only $300,000 is subject to school district tax.³
• Additional exemption for 65+: School districts are required to provide an additional exemption for homeowners age 65 or older. Combined with the $100,000 general exemption, this meaningfully reduces the school district taxable base for senior homeowners. Check your county appraisal district for the current 65+ supplemental amount.
• The practical impact: A retiree who buys a home in Texas at age 66 and locks in the school tax ceiling insulates the majority of their property tax from property value appreciation for the rest of their life. This is a durable hedge that Florida, Nevada, and Tennessee do not offer in the same structured way.

Texas vs. Florida: when each state wins

Both Texas and Florida have no state income tax. The choice between them is primarily a lifestyle and cost-of-living decision, not a tax one — but these differences matter at the margin for retirees:

Texas wins if: You want the school tax freeze, you're comparing inland Texas metros (Austin, Dallas, San Antonio, Houston) to expensive Florida coastal areas, or the cost-of-living differential makes Texas more accessible for a desired lifestyle.

Florida wins if: Property tax costs are a higher priority than the school tax freeze, you prefer Florida's geography, or you're already there and domicile change is not worth the disruption.

For a side-by-side calculation including California or other states, see the all-50-states retirement income tax calculator and the retirement tax relocation guide.

Community property: the Texas angle no one talks about

Texas is a community property state — one of nine in the U.S. This has specific implications for IRA planning that differ from Florida and other common law states:

• Spousal ownership of IRAs: In Texas, a traditional IRA funded with community property earnings is technically community property — meaning both spouses have an equal ownership interest under Texas law. However, federal law (ERISA and the IRC) generally controls IRA beneficiary designations and distribution rules. The practical implication: a spouse who is not named as IRA beneficiary may have community property rights under Texas law that conflict with a beneficiary designation. For large IRAs, this requires coordination between beneficiary designations and any marital property agreements.
• Step-up in basis at death: Community property receives a double step-up in basis at the death of either spouse — both the decedent's and survivor's halves step up to date-of-death fair market value. This matters for taxable accounts and inherited assets, not IRAs directly (which have no capital gains treatment), but can affect the overall estate mix.
• Roth conversions and community property: A large Roth conversion in Texas using one spouse's separate property funds can create complexities if the other spouse has community property claims. Get this reviewed if your conversion strategy involves asymmetric account sizes.

For retirees moving from common law states (California is also community property, but Florida, New York, and most others are not), the community property framework is something to address with an attorney during the domicile change — not a reason to avoid Texas, but worth understanding.

Establishing Texas domicile

Texas does not have the same aggressive domicile enforcement reputation as California or New York. But if you maintain ties to a high-tax state, that state may attempt to tax your income as a continuing resident. The steps to establish Texas domicile are:

1. Texas driver's license — obtained within 90 days of establishing residency (required by Texas law).
2. Texas voter registration — register in your Texas county.
3. Vehicle registration — at least one vehicle registered in Texas.
4. Principal residence filing — file for the Texas homestead exemption with your county appraisal district (applies only to your principal residence).
5. Notify former state — file a final-year return in your old state and update your address with the IRS, financial institutions, and all accounts to the Texas address.
6. Track time — if your former state has a statutory residency test (New York's 183-day rule; California's 546-day presumption for employment-income cases), document days spent outside the old state carefully in the first 1–2 years.

Texas itself has no income tax, so there is no Texas return to file — domicile change is entirely about cutting ties with the high-tax state, not establishing tax obligations in Texas.

See the retirement state tax relocation guide for state-by-state rules on California's FTB domicile tests, New York's 183-day statutory residency trap, and how to sequence the move with Roth conversions for maximum benefit.

Federal tax strategies that still matter in Texas

Moving to Texas eliminates state income tax but does nothing to reduce federal income tax, which is the larger bill for most retirees. The highest-impact federal strategies for Texas retirees:

• Qualified Charitable Distributions (QCDs): Up to $111,000 per person in 2026 can be transferred directly from an IRA to charity, excluded entirely from federal AGI — not just as a deduction, but as income that never appears on your return. This reduces provisional income (reducing Social Security taxability), reduces IRMAA exposure, and reduces the taxable IRA balance for future RMDs. Texas already eliminates state income tax; the QCD reduces federal income tax and Medicare surcharges. See the QCD calculator for the dollar impact on your situation.
• Roth conversions: Texas retirees considering Roth conversions face only federal tax on the conversion — no state tax. This makes Texas an excellent state in which to execute large Roth conversions, particularly in the 60–72 pre-RMD window, since the after-tax cost is lower than in high-tax states. A $100,000 conversion in Texas might cost $22,000 in federal tax; the same conversion in California costs $22,000 federal + ~$9,300 California = $31,300 total. See the Roth conversion sizing calculator for how much to convert each year.
• IRMAA planning: Medicare surcharges are federal — Texas residency provides no relief. A retiree with $250,000 in combined income (RMDs + Social Security + other) faces the same IRMAA tiers as anyone else. QCDs and Roth conversions reduce MAGI and can avoid cliff thresholds. See the IRMAA calculator 2026.
• Asset location still matters: In Texas, the absence of state income tax doesn't change the federal logic of holding bonds and REITs in tax-deferred accounts (where the RMD is forced anyway) and growth assets in Roth. See asset location in retirement.

Four Texas retiree scenarios

Scenario 1: Single retiree, $80K RMD, $450K home (Austin)

Federal tax: ~$8,200 on $80K RMD after standard deduction + age add-on (approximately, before Social Security). Texas state tax: $0. Property tax: ~$6,120/yr at 1.36% effective rate (with $100K homestead exemption, assessed value effectively $350K = ~$4,760 on school district portion + other local levies). If this retiree was previously in New York: NY would have charged ~$2,800 in state income tax on this income (after $20K exclusion and standard deduction). Texas saves ~$2,800/yr in state income tax; property taxes at similar home values are roughly comparable to upstate New York.

Scenario 2: Married couple, $200K combined RMD, $600K home (Dallas suburb)

Texas state income tax: $0. NY equivalent: ~$10,200 after MFJ exclusions and standard deduction. Texas saves $10,200/yr in income tax. Texas property tax: ~$8,160/yr vs. NY suburb at a comparable home value often 1.5–2.0% effective rate = $9,000–$12,000/yr. Net advantage: $10,200 income savings + property tax savings of $840–$3,840/yr = $11,000–$14,000/yr total advantage for Texas.

Scenario 3: Married couple, $350K combined RMD, $1.2M home (Houston area)

Texas income tax savings vs. California: CA would charge ~$22,000 on this income. Property tax: TX $16,320/yr vs. CA (Prop 13 capped basis) maybe $8,000–$10,000/yr on a $1.2M California home if they've owned it for 20+ years. Even at a $8,000 property tax gap in California's favor, Texas saves net $14,000/yr in income tax. Over 20 years: ~$280,000 advantage.

Scenario 4: Retiree with large SDIRA holding Texas real estate

Self-directed IRA investors in Texas real estate sometimes own the property inside an IRA — deferring income but creating UBTI issues and illiquidity for RMDs. Establishing Texas domicile as the IRA owner provides no income tax benefit (IRA income is federal only), but the school tax freeze on a separately owned primary residence, combined with no state tax on eventual in-kind distributions, can be structured advantageously. See the self-directed IRA RMD guide.

Sources

1. Texas Comptroller of Public Accounts — Taxes. Texas imposes no personal income tax. Sales and use tax rate: 6.25% state + up to 2% local (max 8.25%). No income tax filing required for Texas residents.
2. Tax Foundation — Property Taxes by State and County, 2026. Texas average effective property tax rate ~1.36% of assessed home value. Rates vary by county and local jurisdiction; Texas imposes no statewide property tax.
3. Texas Comptroller — Property Tax Exemptions. School district homestead exemption: $100,000 (Proposition 4, approved November 2023). Age 65+ homeowners: additional school district exemption plus a school tax ceiling that prevents school district taxes from increasing after the year of qualification. See the comptroller site for current exemption amounts by taxing unit type.
4. IRS — Retirement Topics: Required Minimum Distributions. RMDs are included in federal taxable income except for qualified Roth distributions or QCDs. Texas has no state income tax; Texas residents owe no state tax on RMD income.

Tax values verified as of June 2026. Texas does not impose an income tax and has no plans to do so — a constitutional prohibition on income taxes without voter approval has been in place since 1993. Property tax rates change annually and vary significantly by county; the effective rates cited are statewide averages and your actual rate will differ.