Texas Has No Income Tax — Here's What You Actually Pay

New residents move to Weatherford and Parker County every year telling themselves the same thing: no state income tax means Texas is cheap to live in. It can be — but not automatically, and not for everyone. Texas still needs to fund schools, roads, and county government, and it collects that money through property tax, sales tax, and a business-level franchise tax instead of taking a cut of your paycheck. Understanding where the money actually comes from changes how you plan.

The trade Texas makes

Most states run on a three-legged stool: income tax, sales tax, and property tax, with income tax often carrying the heaviest load. Texas knocked one leg out entirely. There is no personal state income tax here, full stop — your W-2 wages, your 1099 income, your investment income, none of it gets a state-level bite the way it would in most of the country.

To make up the difference, the other two legs carry more weight. Property tax in Texas runs meaningfully higher than the national average in most counties, and Parker County is no exception. Sales tax applies broadly and stacks a local add-on on top of the state rate. If you moved here from a state with a modest income tax but low property tax, you may find your total tax burden did not drop nearly as much as the "no income tax" headline implied — it just shifted which bill it shows up on.

Property tax: the one that actually funds Texas

Property tax is the workhorse of Texas local government. It funds your school district, the county, the city, and various special districts, and for most homeowners it is the single largest recurring tax payment of the year — often larger than every other tax combined.

Two things determine your bill: the appraised value the county sets on your property, and the combined rate every taxing entity applies to that value. In Parker County, the Parker County Appraisal District values property annually, and that appraisal notice is the document worth reading closely, not filing away. If the appraised value looks disconnected from what your home would actually sell for, you have the right to protest it, and plenty of Weatherford, Aledo, and Hudson Oaks homeowners do exactly that every spring with real results.

Homestead exemptions reduce the number you're taxed on

If the property is your primary residence, a homestead exemption reduces the value the tax is calculated against — it does not touch the rate, it shrinks the base. Texas has expanded homestead exemption benefits over time, including additional relief for seniors and disabled homeowners, and the specific dollar amounts and rules are set (and periodically revised) at the state level. Do not assume last year's exemption amount still applies — confirm the current figures with the appraisal district or your preparer, and make sure the exemption is actually filed and on record for your property, since it is not automatic just because you live there.

Franchise tax: the business-side asterisk

Individuals do not file a Texas income tax return, but many business entities file something else entirely: the Texas franchise tax report, administered by the Comptroller. This is not an income tax in the traditional sense — it is calculated off a margin-based formula — but it is a real annual filing obligation for most LLCs, corporations, and partnerships registered in the state.

Here is the part that trips up new business owners: there is a revenue threshold below which a business owes no franchise tax at all, often called the "no tax due" threshold. That threshold, and the reporting requirements around it, have been revised more than once by the legislature. A business well below the line still typically has to file the report itself, even when zero tax is owed. Skipping the report because "we don't owe anything" is one of the more common ways a small Parker County business accidentally loses its good standing with the state — which can affect its ability to sign contracts, get a loan, or sell the business later. Confirm your current filing obligation rather than assuming your revenue is automatically low enough to skip it.

Sales tax: broad, visible, and easy to get wrong as a business

Texas charges a state sales and use tax, and cities, counties, and special districts can layer local add-ons on top, up to a combined cap set by state law. As a consumer, you see this every time you check out. As a business owner selling taxable goods or certain taxable services, you are responsible for collecting it correctly, filing on the right schedule, and remitting money that was never really yours to begin with.

We cover the business side of sales tax — permits, what counts as taxable, filing frequency, and the mistake of treating collected sales tax as cash flow — in a separate article, because it deserves its own space.

So is Texas actually a low-tax state?

For a lot of households, yes — especially renters, retirees on fixed income living in a modest home, and W-2 earners without significant property. For property owners and business owners, the picture is more mixed. The honest answer is that Texas is a low-income-tax state, not necessarily a low-tax state, and the difference matters when you are budgeting for a first home purchase in Springtown or Azle, or setting up a new LLC in Fort Worth.

What actually helps

• File your homestead exemption the year you close on a primary residence and confirm it is on record.
• Read your annual appraisal notice from the Parker County Appraisal District and protest if the value looks wrong — the deadline is short and firm.
• If you formed an LLC or corporation in Texas, put the franchise tax report deadline on your calendar the same day you form the entity, regardless of expected revenue.
• Budget sales tax collections separately from operating cash if you run a business that collects it.

This article is general information, not tax or legal advice, and specific rates, thresholds, and exemption amounts change over time — confirm current figures with the Comptroller, your county appraisal district, or a professional before you act on them.

Trying to figure out what you actually owe in Texas — as a homeowner or a business owner? Call RD Precision Tax Service in Weatherford at (817) 480-6649, or request a free estimate. Robert has been preparing taxes for individuals, contractors, and small business owners across Weatherford and Parker County since 2017.