Texas has zero state income tax. Here is what that actually means for your Social Security, pension, IRA draws, and capital gains — and the real dollar savings vs. your current state.
Texas has no individual state income tax. This is established in the Texas Constitution — not just a current policy that can be reversed in the next legislative session. It covers every form of retirement income:
You still owe federal income tax. But every dollar of state income tax you would have paid in your current state stays in your pocket permanently after moving to Texas.
| Prior State | State Income Tax Treatment | Annual Savings on $80K Retirement Income | 10-Year Cumulative |
|---|---|---|---|
| Illinois | 4.95% flat; pensions partially exempt, SS exempt | ~$2,500–$3,500 | ~$25,000–$35,000 |
| California | Up to 9.3% on ordinary income; SS exempt | ~$4,500–$7,500 | ~$45,000–$75,000 |
| New York | 4%–10.9%; pensions partially exempt, SS exempt | ~$3,000–$6,000 | ~$30,000–$60,000 |
| Ohio | 2.75% flat (2026+); SS and military exempt | ~$1,500–$2,200 | ~$15,000–$22,000 |
| Michigan | 4.25% flat; pension income partially taxed | ~$2,000–$3,400 | ~$20,000–$34,000 |
| Wisconsin | Up to 7.65%; SS partially taxed at higher incomes | ~$3,000–$5,500 | ~$30,000–$55,000 |
| Florida / Tennessee / Nevada | No state income tax | $0 additional savings | $0 |
Savings estimates assume retirement income of approximately $80,000/year (SS + pension/IRA draw), filing married jointly. Actual savings depend on income sources, filing status, and each state's specific exemptions. Consult a CPA for your situation.
Texas makes up some of the income tax absence through property taxes (high by national standards — though the senior exemptions in Williamson County offset this significantly) and sales tax (8.25% combined state and local rate in Georgetown). Groceries, prescription drugs, and most medical services are not subject to Texas sales tax, which matters more for retirees than most taxpayers.
The tradeoff calculation: for most retirees moving from income-tax states, the state income tax savings exceed the incremental increase in property taxes — especially in Williamson County where the 65+ over-school-tax freeze limits long-term property tax growth.
Texas has no estate tax and no inheritance tax. Texas also does not have a gift tax at the state level. For retirees with significant assets who are thinking about wealth transfer, this matters. States like Massachusetts (estate tax on estates over $2 million), Oregon (over $1 million), and Washington (over $2.193 million) impose estate taxes that Texas simply does not.
We can connect you with a local agent experienced with relocation buyers from Illinois, California, New York, and the Midwest who can help you think through the timing and tax implications.
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