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Texas State Income Tax Withholding

Last Updated: January 2026

Overview

Texas has no state income tax, and this protection is now enshrined in the state constitution. In 2019, Texas voters approved Proposition 4, which requires any future income tax to be approved by a two-thirds majority of the legislature AND a statewide voter referendum.

Tax Status

Tax Type Status
State Income Tax None (Constitutionally Protected)
Withholding Required No

Constitutional Protection

Proposition 4 (2019) added the following protections:

  • The Texas Legislature cannot impose a state income tax without approval by a two-thirds majority in both chambers
  • Any proposed income tax must then be approved by Texas voters in a statewide referendum
  • This creates a significant barrier to ever implementing a state income tax

No Withholding Required

Employers with employees working in Texas:

  • Do NOT withhold state income tax
  • Do NOT file state withholding returns
  • Do NOT need state withholding accounts

Special Considerations

  • Federal Withholding: Federal income tax withholding still applies to all employees
  • FICA Taxes: Social Security and Medicare taxes still apply
  • Unemployment Insurance: Texas requires employer unemployment insurance contributions
  • Franchise Tax: Texas has a franchise (margin) tax on businesses, but this does not affect employee withholding

Local Taxes

  • No Local Income Taxes: Texas municipalities cannot levy local income taxes
  • Property Taxes: Texas relies heavily on property taxes for local revenue
  • Sales Tax: Texas has a 6.25% state sales tax (plus up to 2% local)

Multi-State Employees

If employees work in multiple states:

  • No Texas withholding is required for work performed in Texas
  • Employees may still owe income tax to their state of residence
  • Follow the resident state's withholding rules for days worked in Texas

Employer Benefits

Texas's no-income-tax status offers several advantages:

  • No state withholding calculations or deposits
  • No state withholding returns to file
  • Simplified multi-state payroll when Texas is involved
  • Competitive advantage in attracting employees

States With No Income Tax

Texas is one of nine states with no individual income tax:

  1. Alaska
  2. Florida
  3. Nevada
  4. New Hampshire (fully tax-free as of 2025)
  5. South Dakota
  6. Tennessee
  7. Texas
  8. Washington (no wage tax; has capital gains tax)
  9. Wyoming

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