Paying Texas Taxes in 2024

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When most people think of high state taxes, some states come to mind. These include California, New Jersey, and New York. But some states are friendly to taxpayers. One tax-friendly state is Texas.

According to the Tax Foundation, Texas ranks 13th as 2024’s best state for taxes. That’s why some companies are moving out of California, Oregon, and Washington to take up shop in Texas. But are there any changes to Texas taxes for 2024?

No Income Tax in Texas

Texas is one of nine states in the United States that doesn’t have an income tax. It’s never had an income tax. And it doesn’t look like that’s going to change anytime soon.

In 2019, lawmakers made it nearly impossible to enact an income tax. Texas requires a two-thirds majority of the legislature plus voter support through a statewide referendum to institute an income tax.

But most states’ tax systems consist of income, sales, and property taxes. Without an income tax, an important piece of the revenue pie is missing.

Texas doesn’t seem to have missed an income tax. In 2023, Texas had an $18.6 billion surplus with a $23.8 billion rainy day fund, known as the Economic Stabilization Fund.

But Texas does have some of the highest property taxes in the nation.

Property Taxes Lowered

Property taxes are about to be lowered thanks to Proposition 4. This $18 billion property tax cut package will lower school district property taxes. Texas is ranked sixth in property taxes. Half of the property taxes are used to fund the state school system.

The state of Texas doesn’t have a state property tax. The result is that Texas doesn’t set property tax rates or collect taxes. Local governments are the entities that set rates and tax property owners.

But the high property taxes are changing. Homeowners and businesses will potentially receive thousands of dollars cut from their property taxes.

Proposition 4 is a constitutional amendment that changes how public schools are funded. Under Proposition 4, school districts will receive $7.1 billion from the state to lower their tax rates. It will replace local revenue that has come from property owners with state dollars. The lawmakers refer to this as “compression.”

Non-Homestead Appraisals Cap

Proposition 4 took lowering property taxes even further. It more than doubled the homeowners’ homestead exemption on school district taxes. The homestead exemption is the amount of a home that cannot be taxed for public schools.

The former exemption was $40,000; the new exemption is $100,000. That means you’re only taxed for schools if your home is worth at least $100,000 or more. Or the first $100,000 is tax-free.

‘No Tax Due’ Threshold Reporting Changes

The No Tax Due Report for 2024 and beyond is discontinued for many businesses. The Texas Comptroller of Public Accounts has raised the filing requirement threshold.

Reports originally due on or after Jan. 1, 2024, are affected. And it increases the No Tax Due revenue threshold to $2.4 million. So, those entities below the threshold are not required to file the No Tax Due Report. This also means those entities below the new threshold will not owe the franchise tax.

The new legislation repeals the requirement for some veteran-owned businesses. Prior to the new law, veteran owned businesses had to file a No Tax Due Report during their initial five-year exemption period.

The Public Information Report (PIR) or the Ownership Information Report (OIR) is still required. But, a qualifying veteran-owned business is not required to file a PUR or OIR for the initial five-year period.

‘No Tax Due’ Threshold Affects ‘Franchise Tax’

The new No Tax Due Reports threshold will also affect the “Franchise Tax.” The Franchise tax doesn’t necessarily refer to a franchise business, like Chick-fil-A or Subway. The Franchise tax is a privilege tax. It is imposed on taxable entities and is the right granted to an entity to market its services and goods.

Before the new law, the Franchise Tax report was required by May 15. This requirement was based on the No Tax Due threshold and included zero-dollar sales. A $500 fine was levied on those businesses that failed to file the Franchise Tax Report.

Texas Taxes Will Decrease

Texas doesn’t have an income tax, but it does have high property taxes.

Dale Craymer, president of the Texas Taxpayers and Research Association, said, “Property taxes in Texas are so high because that’s the price we pay for not having a personal income tax in this state.”

Property taxes made up 46.7 percent of taxes imposed on Texans. Sales tax and gross receipts rang in at 34.2 percent.

The new legislation provides some respite and may make it easier for Texans to afford a home.

Always consult with a tax attorney or accountant if you have any questions.

The Epoch Times copyright © 2024. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.