News & Trending Tax News

10 Tax Benefits That Make Texas Ideal for Retirees

You might be surprised at how many retirement perks Texas has to offer.

downtown houston skyline
Updated Sept. 24, 2024
Fact checked

We receive compensation from the products and services mentioned in this story, but the opinions are the author's own. Compensation may impact where offers appear. We have not included all available products or offers. Learn more about how we make money and our editorial policies.

Considering retirement? Texas might just be the ideal destination, not only for its warm climate and diverse cultural offerings but also for its favorable tax environment.

From no state income tax to various property-tax relief programs, Texas can boost your retirement planning and improve your finances during your golden years. 

Earn cash back on everyday purchases with this rare account

Want to earn cash back on your everyday purchases without using a credit card? With the Discover®️ Cashback Debit Checking account (member FDIC), you can earn 1% cash back on up to $3,000 in debit card purchases each month!1

With no credit check to apply and no monthly fees to worry about, you can earn nearly passive income on purchases you’re making anyway — up to an extra $360 a year!

This rare checking account has other great perks too, like access to your paycheck up to 2 days early with Early Pay, no minimum deposit or monthly balance requirements, over 60K fee-free ATMs, and the ability to add cash to your account at Walmart stores nationwide.

Don’t leave money on the table — it only takes minutes to apply and it won’t impact your credit score.

Apply for a Discover Cashback Checking account today

No state income tax

Rix Pix/Adobe income tax filing form

Texas stands out as one of the few states with no state income tax, allowing retirees to keep more of their retirement income for themselves without worrying about deductions from their money.

This absence of state income tax can significantly enhance retirees' financial flexibility and bolster their retirement savings, enabling them to stretch their dollars further during their golden years.

Social Security income is not taxed

chuck/Adobe social security cards

Retirees in Texas benefit from the exemption of Social Security income from state taxation, providing them with additional financial security and preserving their retirement funds.

This exemption allows retirees to maintain a higher standard of living and allocate more resources toward their essential needs and leisure activities, enhancing their overall quality of life during retirement.

Other forms of retirement income aren't taxed

Arthur/Adobe reviewing a pension booklet

From pension distributions to IRA withdrawals, all forms of retirement income remain untaxed at the state level in Texas. This offers retirees a significant added advantage in managing their finances during retirement.

Coupled with no tax on Social Security benefits, this favorable tax treatment of retirement income enables retirees to maintain their pre-retirement lifestyle and pursue their retirement goals without the burden of state tax liabilities.

Earn $200 cash rewards bonus with this incredible card

There's a credit card that's making waves with its amazing bonus and benefits. The Wells Fargo Active Cash® Card(Rates and fees) has no annual fee and you can earn $200 after spending $500 in purchases in the first 3 months.

The Active Cash Card puts cash back into your wallet. Cardholders can earn unlimited 2% cash rewards on purchases — easy! That's one of the best cash rewards options available.

This card also offers an intro APR of 0% for 12 months from account opening on purchases and qualifying balance transfers (then 19.49%, 24.49%, or 29.49% Variable). Which is great for someone who wants a break from high interest rates, while still earning rewards.

The best part? There's no annual fee.

Click here to apply now.

Texas offers a senior property-tax freeze

leszekglasner/Adobe couple holding a miniature

This program allows seniors aged 65 and over to cap their school property taxes, providing valuable tax relief and stability in their retirement years. School taxes account for a significant portion of property taxes.

This initiative ensures that seniors can better predict and manage their property tax expenses, allowing them to remain in their homes and communities without fearing escalating tax burdens as they age.

Texas offers a senior property tax deferral

Kzenon/Adobe couple showing thumbs up

Seniors aged 65 and older, as well as disabled homeowners and veterans, can defer property taxes thanks to section 33.06 of the Texas tax code. The deferment lasts until the estate is settled or the home is sold.

This option gives seniors greater flexibility in managing their finances, allowing them to delay property tax payments until a more convenient time without the risk of penalties or financial strain.

Texas doesn't have an estate tax or inheritance tax

Prostock-studio/Adobe talking to financial advisor

Retirees can rest assured that their heirs won't face estate or inheritance taxes in Texas, allowing them to pass on their assets seamlessly and without additional financial burdens.

This tax advantage enables retirees to preserve their wealth and legacy for future generations, ensuring a smooth transition of assets and providing their loved ones with the financial security they deserve.

Texas doesn't tax income for those who work part-time during retirement

Halfpoint/Adobe senior shop assistant

Retirees looking to supplement their income with part-time work can do so without worrying about state income taxes. This encourages retirees to remain active in the workforce if they choose. 

Retirees can pursue fulfilling opportunities and contribute to their communities while enjoying the benefits of additional income without tax implications.

Texas offers a homestead exemption for seniors

Ljupco Smokovski/Adobe sitting on a bench

Texas allows all homeowners to apply for the homestead exemption, which takes $40,000 of taxable property value off your primary residence when your school taxes are calculated.

Fortunately, seniors and those who are disabled are eligible for an additional $10,000 exemption. This added benefit provides significant tax savings, reducing the taxable property value of a senior’s primary residence.

Texas has no corporate income tax

Joanrae P/peopleimages.com/Adobe confident and proud female

Entrepreneurs considering starting a business in retirement can benefit from Texas's lack of corporate income tax, creating a favorable tax environment for part-time business ventures and side hustles.

This tax advantage encourages entrepreneurial activity and investment in the state, fostering economic growth and innovation while providing retirees with opportunities to pursue their passions and generate additional income streams in retirement.

If you’re over 50, take advantage of massive discounts and financial resources

Over 50? Join AARP today — because if you’re not a member you could be missing out on huge perks. When you start your membership today, you can get discounts on things like travel, meal deliveries, eyeglasses, prescriptions that aren’t covered by insurance and more.

How to become a member today:

  • Go here, select your free gift, and click “Join Today” 
  • Create your account (important!) by answering a few simple questions 
  • Start enjoying your discounts and perks!

You’ll also get insider info on social security, job listings, caregiving, and retirement planning. And you’ll get access to AARP’s Fraud Watch Network to help you protect your money, as well as tools to help you plan for retirement.

Important: Start your membership by creating an account here and filling in all of the information (Do not skip this step!) Doing so will allow you to take up 25% off your AARP membership, making it just $12 per year with auto-renewal.

Become an AARP member now

Groceries, prescriptions, and over-the-counter medication are not subject to sales tax

Reese/peopleimages.com/Adobe writing prescription at pharmacy

All Texans enjoy savings on everyday essentials, such as groceries, prescriptions, and over-the-counter medications. All those items are exempt from sales tax, contributing to overall cost savings in retirement.

This tax exemption helps retirees stretch their retirement dollars further, enabling them to afford essential goods and services while maintaining their standard of living and financial well-being.

Bottom line

Reagan/Adobe austin aerial skyline

As a retiree, it's important to avoid throwing your money away, and that includes paying too much in taxes.

With its array of tax benefits tailored for retirees, the Lone Star State could offer you a financially secure and comfortable retirement.

So, why not explore the possibilities and see if Texas could be your ideal retirement destination?

Lucrative, Flat-Rate Cash Rewards

5.0
info

Wells Fargo Active Cash® Card

Current Offer

$200 cash rewards bonus after spending $500 in purchases in the first 3 months

Annual Fee

$0

Rewards Rate

Earn unlimited 2% cash rewards on purchases

Benefits and Drawbacks
Card Details