Overview of Texas Taxes
Texas has no state income tax, which means your salary is only subject to federal income taxes if you live and work in Texas. No Texas cities impose a local income tax.
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- Our Tax Expert
Jennifer Mansfield, CPA Tax
Jennifer Mansfield, CPA, JD/LLM-Tax, is a Certified Public Accountant with more than 30 years of experience providing tax advice. SmartAsset’s tax expert has a degree in Accounting and Business/Management from the University of Wyoming, as well as both a Masters in Tax Laws and a Juris Doctorate from Georgetown University Law Center. Jennifer has mostly worked in public accounting firms, including Ernst & Young and Deloitte. She is passionate about helping provide people and businesses with valuable accounting and tax advice to allow them to prosper financially. Jennifer lives in Arizona and was recently named to the Greater Tucson Leadership Program.
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Texas Paycheck Calculator
Texas Paycheck Quick Facts
- Texas income tax rate: 0%
- Median household income: $59,570 (U.S. Census Bureau)
- Number of cities that have local income taxes: 0
How Your Texas Paycheck Works
Your hourly wage or annual salary can't give a perfect indication of how much you'll see in your paychecks each year because your employer also withholds taxes from your pay. You and your employer will each contribute 6.2% of your earnings for Social Security taxes and 1.45% of your earnings for Medicare taxes. These taxes together are called FICA taxes. No matter which state you call home, you have to pay FICA taxes. Income you earn that's in excess of $200,000 is also subject to a 0.9% Medicare surtax. (Your employer doesn’t match that.)
Any premiums that you pay for employer-sponsored health insurance or other benefits will also come out of your paycheck. The same is true if you contribute to retirement accounts, like a 401(k), or a medical expense account, such as a health savings account (HSA). These accounts take pre-tax money (meaning they come out of your pay before income tax is applied) so they also reduce your taxable income.
Your marital status, pay frequency, wages and more all contribute to the size of your paycheck. If you think too much or too little money is being withheld from your paycheck, you can file a new W-4 with your employer at any time during the year. When you do this, be sure to indicate how much extra income you want withheld so as to avoid a tax bill come April each year.
It may be worth rechecking your W-4 at some point, as President Trump's tax plan changed withholding calculations for the 2018 tax year. Withholding calculations didn't change in 2019, though the 2020 W-4 includes a few revisions. It no longer lets filers claim allowances, as it instead features a five-step process that asks you to enter annual dollar amounts for income tax credits, non-wage income, itemized and other deductions and total annual taxable wages. If you were hired before 2020, you don't need to complete the form unless you plan to adjust your withholdings or change jobs in 2020. All employees hired on or after Jan. 1, 2020 must complete the updated version.
A financial advisor in Texas can help you understand how taxes fit into your overall financial goals. Financial advisors can also help with investing and financial plans, including retirement, homeownership, insurance and more, to make sure you are preparing for the future.
Texas Median Household Income
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Payroll taxes in Texas are relatively simple because there are no state or local income taxes. Texas is a good place to be self-employed or own a business because the tax withholding won't be too much of a headache. And if you live in a state with an income tax but you work in Texas, you'll be sitting pretty compared to your neighbors who work in a state where their wages are taxed at the state level. If you're considering moving to the Lone Star State, our Texas mortgage guide has information about rates, getting a mortgage in Texas and details about each county.
Be aware, though, that payroll taxes aren’t the only relevant taxes in a household budget. In part to make up for its lack of a state or local income tax, sales and property taxes in Texas tend to be high. So your big Texas paycheck may take a hit when your property taxes come due.
How You Can Affect Your Texas Paycheck
If you want to boost your paycheck rather than find tax-advantaged deductions from it, you can seek what are called supplemental wages. That includes overtime, bonuses, commissions, awards, prizes and retroactive salary increases. These supplemental wages would not be subject to taxation in Texas because the state lacks an income tax. However, they will be subject to federal income taxes.
The federal tax rate for supplemental wages depends on whether your employer rolls them in with your regular wages or disburses them separately. They can either be taxed at your regular rate, or at a flat rate of 25%. If your normal tax rate is higher than 25% you might want to ask your employer to identify your supplemental wages separately and tax them at that 25% rate.
Most Paycheck Friendly Places
SmartAsset's interactive map highlights the most paycheck friendly counties across the country. Zoom between states and the national map to see data points for each region, or look specifically at one of the four factors driving our analysis: Semi-Monthly Paycheck, Purchasing Power, Unemployment Rate, and Income Growth.
Methodology Our study aims to find the most paycheck friendly places in the country. These are places in the country with favorable economic conditions where you get to keep more of the money you make. To find these places we considered four different factors: semi-monthly paycheck, purchasing power, unemployment rate and income growth.
First, we calculated the semi-monthly paycheck for a single individual with two personal allowances. We applied relevant deductions and exemptions before calculating income tax withholding. To better compare withholding across counties we assumed a $50,000 annual income. We then indexed the paycheck amount for each county to reflect the counties with the lowest withholding burden.
We then created a purchasing power index for each county. This reflects the counties with the highest ratio of household income to cost of living. We also created an unemployment rate index that shows the counties with the lowest unemployment. For income growth, we calculated the annual growth in median income over five years for each county and indexed the results.
Finally, we calculated the weighted average of the indices to yield an overall paycheck friendliness score. We used a one half weighting for semi-monthly paycheck and a one-sixth weighting for purchasing power, unemployment rate and income growth. We indexed the final number so higher values reflect the most paycheck friendly places.
Sources: SmartAsset, government websites, US Census Bureau 2017 5-Year American Community Survey, MIT Living Wage Study, Bureau of Labor Statistics