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Tax bracket changes
Changes to tax brackets are one of the essential modifications for the 2023 tax season. Texas taxpayers are also affected by this. Although the income cutoffs for each tax bracket have been increased to account for inflation, the top marginal tax rate will stay at 37%. This implies that some Texans’ tax rates might marginally rise while others would fall.
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No State Income Tax
Being a taxpayer in Texas has many advantages, including the absence of state income tax. As a result, Texas taxpayers do not have to worry about preparing a state income tax return or paying state income tax. When thinking about your overall tax obligation, keep this in mind.
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Modifications to Sales Tax
Texas receives a sizable portion of its revenue through sales tax. Remote vendors will have to collect and pay Texas sales tax beginning in 2023 if their sales to Texas residents generate more than $100,000 in gross revenue. This rule applies to companies that do not have a physical presence in Texas but do business online.
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Increased Homestead Exemption
The homestead exemption has been enhanced for Texas homeowners for the 2023 tax year. Homeowners who use their home as their primary residence are eligible for the homestead exemption, a reduction in their property taxes. The homestead exemption has been raised to $35,000 for the 2023 tax year.
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Caps on Property Taxes
A rule limiting the amount that property taxes can rise each year without voter approval was passed by Texas lawmakers in 2019. This ceiling is established at 3.5% annually for most municipal governments. The top for school districts is set at 2.5% annually. Remember this as a critical consideration when planning a property tax budget.
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Federal Tax Refunds
Texas does not have a state income tax; however, taxpayers who paid too much in sales and use taxes may be entitled to a state tax refund. Businesses and individuals who spent more in state sales and used tax than they should be are eligible for a refund.
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No Estate Taxes
Texas does not impose an estate tax, just like other states do. As a result, Texas residents do not have to worry about estate taxes once they pass away. While making an estate plan, this is a crucial factor to take into account.
As Texas taxpayers prepare to file their 2023 taxes, several crucial tax improvements must be remembered. Changes to tax brackets, the elimination of the state income tax, modifications to the sales tax for online sellers, an increase in the homestead exemption, property tax caps, state tax refunds for overpaid sales and use taxes, and the elimination of the estate tax are among these updates. To be sure you are utilizing all Texas tax year 2023 deductions and credits available to you, visit an experienced financial advisor for assistance.
