Texas for NRI families: no income tax, but property tax and community property

Texas is attractive to many Indian-origin families because it has no personal income tax. That is true, but it is only part of the picture, and a move to Texas does not end every tax duty.

No state income tax

The Texas Constitution prohibits a tax on an individual's net income, so Texas has no personal income tax on wages, interest, dividends or capital gains, and there is no Texas return to file. Your federal return is unchanged, and Indian income is still reported on it.

A move to Texas from another state does not end your duties to the old state. What you owe the old state depends on its rules and on when you actually left. See the state taxes guide.

Property tax

What Texas does not collect in income tax, it collects in property tax, which is set by local governments, not by the state.

• Valuation. County appraisal districts value property as of 1 January. The notice of appraised value usually reaches homeowners by 1 April.
• Homestead exemption. Your main home qualifies for an exemption from the school district tax, currently $140,000 of value, with more for owners over 65 or disabled. You apply to the county appraisal district, generally before 1 May, and for one residence only. Check the current amount.
• Homestead cap. The appraised value of a homestead can rise by no more than 10% a year once the exemption has been held.
• Protests. You can protest the appraisal by 15 May, or 30 days after the notice is mailed if that is later. Many homeowners do this every year.

The Comptroller does not publish a typical rate. Rates vary by city, county and school district and are often high relative to the home's price, so compare the full annual bill when you choose where to buy.

Sales tax

The state rate is 6.25%, and local governments add up to 2%, for a maximum combined rate of 8.25%.

If you run a business

Texas has a franchise (margin) tax on businesses, not on individuals as such. No tax is due when annual revenue is below $2.65 million for report years 2026 and 2027. Sole proprietorships and general partnerships owned entirely by individuals are generally not taxable entities. A single-member LLC is taxable even if the federal return treats it as a sole proprietorship, so an LLC owner should check the rules. The report is still filed in some cases even when no tax is due.

Community property

Texas is a community property state. In general terms, property acquired during marriage belongs to both spouses equally, and income from wages or a business during the marriage is community income. This matters in two ways.

• Married filing separately. The IRS requires each spouse to report half of the community income, plus their own separate income, with an allocation on Form 8958. For a couple where one spouse is a non-resident alien in India, check this before choosing separate filing. See the spouse article.
• Estate planning. Ownership of assets bought during marriage can differ from the name on the title.

Texas treats income from most separate property as community income as well.

No estate or inheritance tax

Texas collects no state estate or inheritance tax. The federal estate tax is separate and applies to citizens and residents on worldwide assets, including property in India.

What to do

1. Budget for property tax, not just the price of the home.
2. File the homestead exemption promptly after you buy.
3. Calendar the appraisal notice in spring and decide whether to protest.
4. If you are married filing separately, ask how community property changes the figures.

No state income tax is not no tax. The usual trade is higher property tax and, for some, a franchise tax on an LLC.