Tax season is here, and if you are a Texas resident, you may have some questions about how to file your state and federal taxes. Texas is one of the few states that does not have a personal income tax, but that does not mean you are off the hook from paying taxes. Here are seven things you need to know before filing your taxes in 2024.
1. You still have to file a federal income tax return
Even though Texas does not have a state income tax, you still have to report your income and pay taxes to the federal government. The deadline to file your federal income tax return is April 15, 2024, unless you request an extension. You can file your federal taxes online, by mail, or through a tax preparer. You will need to have your W-2s, 1099s, and other income documents ready, as well as your deductions and credits.
2. You may have to pay franchise tax if you own a business
If you own a business in Texas, you may have to pay a franchise tax, which is a tax on the privilege of doing business in the state. The franchise tax rate varies depending on the type of business and its revenue. For 2024, the franchise tax rates are:
- 0.375% for wholesalers and retailers
- 0.75% for other businesses
- 0.331% for businesses that qualify for the EZ computation
The franchise tax report is due on May 15, 2024, and you can file it online or by mail. You can also request an extension of up to six months.
3. You may have to pay property tax if you own real estate
If you own real estate in Texas, you may have to pay property tax to your local county, city, school district, and other taxing entities. The property tax rate is determined by the appraised value of your property and the tax rate set by each entity. The average property tax rate in Texas for 2023 was 1.69%, which means that for a home valued at $200,000, you would pay $3,380 in property taxes.
The property tax bill is usually mailed to you in October or November, and the payment is due on January 31, 2024. You can pay your property tax online, by mail, or in person. You can also apply for exemptions, deferrals, or installment plans if you qualify.
4. You may have to pay sales tax if you buy or sell goods or services
Texas has a sales tax of 6.25% on most goods and services sold in the state. Some local jurisdictions may add an additional sales tax of up to 2%, making the total sales tax rate as high as 8.25%. The sales tax applies to items such as clothing, furniture, electronics, vehicles, and restaurant meals. Some items are exempt from sales tax, such as groceries, prescription drugs, and medical devices.
If you buy something from another state or country and bring it to Texas, you may have to pay a use tax, which is the same as the sales tax. You can report and pay the use tax on your federal income tax return, or on a separate form from the Texas Comptroller.
If you sell goods or services in Texas, you may have to collect and remit the sales tax to the state. You will need to obtain a sales tax permit from the Texas Comptroller and file a sales tax return monthly, quarterly, or annually, depending on your sales volume. You can file and pay your sales tax online or by mail.
5. You may have to pay hotel occupancy tax if you rent out a room or a home
If you rent out a room or a home in Texas for less than 30 days, you may have to pay a hotel occupancy tax, which is a tax on the rental charge for the accommodation. The hotel occupancy tax rate is 6% for the state, and up to 7% for some local jurisdictions, making the total hotel occupancy tax rate as high as 13%. The hotel occupancy tax applies to hotels, motels, bed and breakfasts, Airbnb, VRBO, and other short-term rentals.
If you are the owner or operator of the accommodation, you are responsible for collecting and remitting the hotel occupancy tax to the state and local authorities. You will need to register with the Texas Comptroller and file a hotel occupancy tax report monthly, quarterly, or annually, depending on your rental revenue. You can file and pay your hotel occupancy tax online or by mail.
6. You may have to pay motor vehicle tax if you buy or sell a car
If you buy or sell a car in Texas, you may have to pay a motor vehicle tax, which is a tax on the value of the vehicle. The motor vehicle tax rate is 6.25% for most vehicles, and 2.5% for off-highway vehicles. The motor vehicle tax applies to cars, trucks, motorcycles, trailers, and other vehicles that require registration.
If you buy a vehicle from a dealer, the dealer will collect and remit the motor vehicle tax for you. If you buy a vehicle from a private party, you will have to pay the motor vehicle tax when you title and register the vehicle at your local county tax office. You will need to have the title, bill of sale, and proof of insurance ready.
If you sell a vehicle, you will have to transfer the title to the buyer and notify the Texas Department of Motor Vehicles of the sale. You will also have to remove the license plates and registration sticker from the vehicle.
7. You may be eligible for tax relief or assistance programs
If you are a low-income, elderly, disabled, or veteran taxpayer, you may be eligible for some tax relief or assistance programs in Texas. Some of these programs are:
Property Tax Exemptions: You may qualify for a partial or total exemption from property taxes if you meet certain criteria, such as being over 65, disabled, a veteran, or a surviving spouse of a veteran. You can apply for a property tax exemption at your local appraisal district.
Property Tax Deferrals: You may defer paying your property taxes if you are over 65, disabled, a veteran, or a surviving spouse of a veteran, and you live in your home as your primary residence. You can apply for a property tax deferral at your local county tax office.
Property Tax Installment Plans: You may pay your property taxes in four equal installments if you are over 65, disabled, a veteran, or a surviving spouse of a veteran, and you live in your home as your primary residence. You can request a property tax installment plan at your local county tax office.
Sales Tax Exemptions: You may be exempt from paying sales tax on certain items if you are a qualifying organization, such as a nonprofit, religious, educational, or charitable entity. You can apply for a sales tax exemption from the Texas Comptroller.
Sales Tax Refunds: You may claim a refund of sales tax paid on certain items if you are a qualifying individual, such as a foreign diplomat, a member of the U.S. armed forces, or a Native American. You can file a sales tax refund claim with the Texas Comptroller.
Hotel Occupancy Tax Exemptions: You may be exempt from paying hotel occupancy tax on certain accommodations if you are a qualifying individual or organization, such as a state or federal employee, a member of the U.S. armed forces, a foreign diplomat, or a nonprofit, religious, educational, or charitable entity. You can present a valid exemption certificate or identification card to the hotel owner or operator.
Motor Vehicle Tax Exemptions: You may be exempt from paying motor vehicle tax on certain vehicles if you are a qualifying individual or organization, such as a disabled veteran, a member of the U.S. armed forces, a foreign diplomat, or a nonprofit, religious, educational, or charitable entity. You can present a valid exemption certificate or identification card to the dealer or the county tax office.
Conclusion
Filing taxes in Texas can be a complex and confusing process, but it does not have to be. By knowing the basics of the different types of taxes, the deadlines, the rates, and the exemptions, you can prepare and file your taxes with confidence and ease. If you need more help, you can consult a tax professional, visit the Texas Comptroller website, or call the toll-free tax assistance line at 1-800-252-5555. Happy filing!