Texas Retirement

The Lone Star State has some attractive features for retirees. These include no state income tax, a low cost of living, and a warm climate.

Texas has no personal income, capital gains, or inheritance tax. This gives Texas one of the lowest individual tax rates in the nation. That said, there are several other taxes residents have to pay. Texas residents must pay the federal income tax and could be liable for income taxes in some other states.

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Texas Sales Tax

The main tax in Texas is the Sales and Use Tax. This tax supports the state, local, and county governments. The maximum rate for this tax is 8.25%, but the levy can be lower in regions where local and county governments choose not to collect their portion of the tax.

All areas in Texas have a 6.25% sales tax collected for the state government. Other governments can impose a 0.24-2.0% city sales tax, a 0.5 -1.5% tax for county government, a 0.254-1.0% sales tax for transit, and a 0.125%-2.0% sales tax for special districts. The sales tax in Texas is capped at 8.25% by law.

The Texas sales tax covers most services including legal fees and insurance. It also covers most retail purchases, but there are some exemptions, over the counter drugs and prescription drugs being one case.

There is no tax on unprepared food purchased at grocery and convenience stores in Texas. There is no tax on raw vegetables or uncooked meat but there ois a tax on a sandwich purchased from a deli. Almost all other retail sales are subject to sales tax.

Texas has a yearly Sales Tax Holiday during which no sales tax is charged on select items that cost less than $100. This holiday usually takes place in late August.

Texas Property Tax System

Property taxes in Texas are collected by the county or city tax collector. The taxes go only to local government and are set by the county appraiser or an appraisal district. School districts, cities, counties, and special districts can all collect property Texas property taxes.

To learn the rate of property tax in Texas you will have to contact your / local Tax Appraiser. Individuals who dispute their property tax assessment can appeal to an Appraisal Review Board. Under Texas law every county and appraisal district has to maintain such a board.

Texas Retirement Law

Texas residents need to be careful because legal protections on retirement assets are limited. Pensions, annuities, IRAs, and investment accounts are vulnerable to debt collection efforts and lawsuits in Texas. It is possible for a Texas resident to lose all or most of his or her retirement assets in a lawsuit, debt collection efforts, or a divorce.

Married couples need to be particularly careful because Texas law has marital property provisions. If assets are listed as marital property, complex legal action could be necessary to divide them up in the event of divorce. Pensions, 401Ks, and other retirement assets are usually listed as marital property. A married couple can avoid a dispute over retirement assets by designating them as separate property.

Capital: Austin
Cost of Living Rank: #5
Sales Tax: Up to 8.25%
Income Tax: None
State Website: http://www.texas.gov