Estate and Inheritance Taxes by State, 2024
In addition to the federal estate tax, with a top rate of 40 percent, 12 states and DC impose additional estate taxes, while six states levy inheritance taxes.
7 min read
Texas | #7 Overall
Texas‘s tax system ranks 7th overall on the 2025 State Tax Competitiveness Index. Texas boasts a regionally and nationally competitive tax code. The state does not impose an individual income tax. However, unlike most others without an individual income tax, Texas (like Washington) applies the corporate gross receipts tax (also known as the “margin tax”) to S corporation and LLC income when others accord them pass-through status.
The margin tax is complex and burdensome. As a modified gross receipts tax, it applies to a firm’s total sales with limited deductions, rather than being imposed on profits.
In 2023, Texas voted to increase the homestead exemption on residential property from $40,000 to $100,000 ($110,000 for the elderly, disabled, and disabled veterans). While seemingly beneficial for taxpayers, homestead exemptions are nonneutral and tend to shift the tax burden to commercial property and renters. Moreover, a significantly increased homestead exemption could deny local governments the funding needed to properly resource public services, including education.
Texas treats remote sellers and marketplace facilitators competitively. Unlike most other states that require such sellers to collect and remit sales taxes if either a transaction or dollar threshold is surpassed, Texas only imposes a dollar threshold. Additionally, the dollar threshold is $500,000, greater than most other states, which better aligns the threshold with the size of the state’s economy.
| Category | Rank | Rank Change | Score |
|---|---|---|---|
| Overall | 7 | 0 | 6.00 |
| Corporate Taxes | 46 | 0 | 3.94 |
| Individual Income Taxes | 1 | 0 | 10.00 |
| Sales Taxes | 36 | 0 | 4.21 |
| Property Taxes | 40 | -2 | 4.29 |
| Unemployment Insurance Taxes | 30 | -1 | 4.76 |
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