Retirement Taxes in Texas: What Retirees Should Consider

Retiring in Austin, TX, is attractive for many reasons. The city offers a high quality of life and interesting culture. Many also like the favorable tax laws. The retirement taxes in Texas help make Austin one of the best places to retire.

But what makes the tax laws good for retirees? Read on to find out!

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The Benefits of Retirement Taxes in Texas

No State Income Tax

One of the most significant advantages of retiring in Texas is the absence of state income tax. You won’t have to pay state income taxes, whether it is social security, a pension, or retirement accounts. Federal income tax still applies, but the lack of a state income tax will allow you to keep more of your income.

Property Taxes and Homestead Exemption

While Texas doesn’t have state income tax, it does have property taxes. Property tax rates vary by county, so you must research the rates in different areas. For Austin, that means considering taxes in Travis County or Williamson County. However, you can reduce your property tax liability with the Texas homestead exemption.

Sales Tax Considerations

Another tax to consider is the sales tax, which can vary by location. In Texas, the state sales tax rate is 6.25%. However, different cities may also have a sales tax. Austin has an additional 2% sales tax for a combined rate of 8.25%.

Retirement Account Withdrawals

Texas doesn’t tax social security benefits or retirement account withdrawals when accessing your retirement savings. This tax-friendly approach can significantly benefit retirees. It can help retirees stretch their savings further and enjoy a better quality of life.

Senior Tax Deferral

Texas’s Senior Tax Deferral program allows eligible seniors to postpone some of their property taxes. This deferred amount accrues a low interest rate and becomes a lien against the property. While it doesn’t eliminate property taxes, it can provide financial relief for low-income seniors.

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