If you live and work in Texas, you likely have learned that it is one of the few states that doesn’t impose a state income tax on residents. You read that right. Texas state tax rate is nada! Note that this does not mean Texas workers are exempt from the U.S. tax system. In fact, there are two certainties in the United States: paying taxes (regardless of where you reside or work) and Tax Goddess reducing your tax payments legally. Now, the question remains: how much tax is deducted from a paycheck in Texas?
Understanding Taxes and Tax Deductions
Before delving deeper, let’s clarify some terminology. A tax deduction refers to an expense subtracted from your gross income to reduce the total amount of income subject to taxation. Taxes can be levied at various levels: federal, state, and local, and this explains why Texans are not entirely free from paying taxes. Typically, the amount deducted from your paycheck largely depends on your earnings, marital status, and filing status.
Texas State Tax: An Overview
As mentioned earlier, the Lone Star State doesn’t require residents to pay state income tax. So, if you’re working in Texas, you don’t need to worry about seeing that not-so-appealing state income tax deduction on your paycheck stub. This could mean more money in your pocket, as you get to save whatever residents of other states pay in state income tax.
Federal Tax Deductions from a Paycheck in Texas
Although Texas does not have a state income tax, federal income tax applies to everyone across the nation, including Texans. The federal income tax is based on tax brackets, which are ranges of income taxed at a given rate. For tax year 2026, the permanent extension of individual tax rates through the One Big Beautiful Bill Act (OBBB) means you should expect similar, inflation-adjusted brackets compared to previous years.
The standard deduction also plays a massive role in your take-home pay. For 2026, the standard deduction has increased to the following amounts:
- Married couples filing jointly: $32,200
- Heads of household: $24,150
- Single taxpayers and married individuals filing separately: $16,100
The percentage deducted from your paycheck for federal tax depends on factors like your filing status, income, and any extra withholding you requested on your W-4 form.
NEW FOR 2026: No Tax on Overtime and Tips
Under the OBBBA, hourly and other non-exempt workers in Texas gain a massive new benefit: the ability to deduct qualified overtime and tip income from their federal taxable income.
- Overtime Deduction: You can deduct the “extra half” portion of your time-and-a-half pay. For example, if your base rate is $20/hour and your overtime is $30/hour, that $10/hour “premium” is deductible. This is capped at $12,500 annually for single filers and $25,000 for joint filers.
- Tip Deduction: Certain workers where tipping is customary can deduct up to $25,000 in qualified tips.
- Phase-out: These deductions begin to phase out for individuals with a modified adjusted gross income (MAGI) over $150,000 ($300,000 for joint filers).
Other Deductions from Your Paycheck in Texas
Aside from federal income tax, other mandatory deductions may impact your paycheck. The Federal Insurance Contributions Act (FICA) mandates Social Security and Medicare payments for all hourly employees and salaried workers.
FICA Tax Rates for 2026
- Social Security Tax: The rate remains 6.2% of your gross income, but in 2026, the wage base limit increases to $184,500. Any income earned above this cap is no longer subject to this specific tax.
- Medicare Tax: The rate is 1.45% of all wages, with no wage base limit. High earners making over $200,000 should be aware of an additional 0.9% Medicare surtax that is withheld solely from employee wages.
Bonuses and Supplemental Wages: The 22% Rule
If you receive a bonus or commission in Texas, your employer may withhold federal tax at a flat rate of 22% for amounts up to $1 million. Because Texas has no state tax, this federal withholding is the primary hit to your “supplemental wages.” If your bonus is lumped with your regular check, it might be withheld at your higher marginal tax rate instead.
Advanced Planning: Trump Accounts and HSAs
Starting July 4, 2026, a groundbreaking payroll benefit becomes available: Trump Accounts. These are tax-advantaged investment accounts designed to build generational wealth for American children under 18. Under a new employer-sponsored program, companies can contribute up to $2,500 annually to the account of an employee or their dependent child. These employer contributions are excluded from the employee’s gross income, providing a powerful tax-free perk for families. Note that while the total annual limit from all sources is $5,000 per child, the initial $1,000 government seed deposit for children born between 2025 and 2028 does not count toward this limit.
Additionally, the Health Savings Account (HSA) has become even more flexible for 2026. Following recent legislative fixes, individuals enrolled in Direct Primary Care (DPC) arrangements are now officially eligible to contribute to an HSA, provided their monthly DPC membership fees do not exceed $150 for individuals or $300 for families. Furthermore, these DPC fees are now recognized as qualified medical expenses, meaning you can use your HSA funds to pay for them tax-free. By making pre-tax contributions to an HSA, you can effectively lower your Adjusted Gross Income (AGI) while securing high-quality, personalized primary care.
Form 8962 and Form 1095-A
If you buy your health insurance through the marketplace rather than an employer, you’ll be required to complete Form 8962 to claim the premium tax credit. You will receive a health insurance marketplace statement, known as Form 1095-A, which provides the necessary data to reconcile your advance credit payments with your actual income. This Form 8962 premium tax reconciliation is vital for ensuring you aren’t overpaying for your healthcare throughout the year.
Paycheck Tax Calculator: A Handy Tool
A paycheck calculator helps you estimate the amount of tax that Uncle Sam will deduct from your paycheck. By inputting details such as your pay period, pay frequency, and filing status, the tool estimates your tax liability. This can be instrumental in budget planning and understanding your net pay versus your gross earnings.
Texas Take-Home Pay Calculator: Making Sense of Your Earnings
Given Texas’s unique tax landscape, a Texas take-home pay calculator is especially useful. It estimates your final earnings after all deductions, including federal taxes and any payroll deductions such as health insurance or 401(k) contributions. To use this effectively, you typically need to enter your gross pay, pay frequency, and any relevant pre-tax or post-tax deductions. The calculator provides an estimate of your net income, allowing you to plan for monthly expenses with higher accuracy.
Are You Being Overtaxed or Undertaxed?
If you feel you are being overtaxed or undertaxed, you have the option of refiling your W-4 with your employer. You can indicate a specific amount you would like withheld from each payment to ensure you don’t get a surprise tax bill next spring.
Recent tax law changes mean the W-4 form no longer uses the old “allowances” system. Instead, it uses a multi-step process to account for other income, deductions, and credits. If this feels complicated, you can team up with a tax strategist to help identify additional ways to reduce your payments legally.
Key Takeaway
State income tax is not the sole determinant of your take-home pay in Texas, as there are several other factors, like FICA taxes and federal brackets, that go into determining your final check. Utilizing tools like a paycheck calculator can help you work out rough estimates of your earnings.
But if you really want to stay ahead of the curve and maximize how much of your income you keep, partnering with the tax strategists at Tax Goddess is the way to go. Book a free consultation today, and let’s discuss saving your hard-earned dollars through expert planning.
