Property tax and the sales-tax deduction: what Texans can actually deduct
With no state income tax, Texans deduct sales tax instead, and property tax counts too. Both sit under one cap, and the homestead exemption comes first.
Quick answers
- Can Texans deduct sales tax instead of state income tax?
- Yes. Schedule A lets you elect to deduct state and local general sales taxes in place of state and local income taxes, which is what Texans do because Texas levies no income tax.
- Is my property tax deductible?
- If you itemize, yes. State and local real property taxes are deductible, but they share one combined cap with the sales or income tax you also deduct.
- Does the homestead exemption lower my federal tax?
- No. It lowers the Texas property tax the local taxing units charge you. It is often worth more than the federal deduction, and it is claimed through the county appraisal district.
Texas has no state income tax to deduct, so Texans deduct state and local sales tax instead. Property tax is deductible too, and the two share one cap on the federal return.
First gate: you have to itemize
Both of these are itemized deductions on Schedule A, which means they do nothing at all unless your itemized deductions together come to more than the standard deduction. For 2025 that is $15,750 for a single filer and $31,500 on a joint return, and a deduction below those amounts is a deduction you never take. Standard or itemized is the comparison to run before any of the rest of this matters.
The two things Texans deduct
The categories of deductible taxes include state and local real property taxes, and state and local income taxes — or, in place of those income taxes, state and local general sales taxes. Deductible real property taxes are generally taxes on real property levied for the general public welfare, charged uniformly across the jurisdiction.
The election between income tax and sales tax is a box on Schedule A, and for a Texan it is not much of a choice: with no state income tax to deduct, the sales tax side is the one that carries a number. Making the election is what turns a year of ordinary spending into a deduction.
The cap that covers both
Both sit under one combined limit on state and local income, sales and property taxes, which for 2025 is $40,000. Property tax and sales tax do not each get their own allowance; they share this one.
Above a modified adjusted gross income of $500,000 the cap is reduced, which a Houston household with two professional incomes can reach without feeling wealthy. The reduction does not run all the way down: the cap does not fall below $10,000. Be careful reading older pages on this, including some still on irs.gov, because several of them describe the previous, much lower limit as though it were current.
How to figure the sales tax deduction
There are two routes. Actual expenses means keeping every receipt for a year and adding up the tax on them, which almost nobody does. The optional sales tax tables in the Schedule A instructions estimate your general sales tax from income, family size and where you live, and then let you add the tax you actually paid on specified large purchases such as a vehicle.
The IRS runs a Sales Tax Deduction Calculator that does the table version from those same inputs. The practical answer for most people is to take the table amount and add the big purchases on top, keeping the receipts for those.
Texas rates, so you know what you paid
Texas imposes a state sales and use tax on most retail sales, leases and rentals of goods and on taxable services, and local taxing jurisdictions can add their own on top up to a limit. The point of the figures below is orientation rather than lookup: your receipts show what you actually paid.
| Texas state sales and use tax rate | 6.25% | Texas Comptroller of Public Accounts, Sales and Use Tax |
|---|---|---|
| Maximum additional local sales and use tax rate in Texas | 2% | Texas Comptroller of Public Accounts, Sales and Use Tax |
| Maximum combined Texas state and local sales and use tax rate | 8.25% | Texas Comptroller of Public Accounts, Sales and Use Tax |
The homestead exemption is the bigger lever
This one is not federal at all, and for most Texas homeowners it is worth more than the federal deduction. A general residence homestead exempts part of your home's value from taxation. School districts are required to provide an exemption on a residence homestead, any taxing unit may adopt a local option exemption of up to twenty percent of a property's appraised value, and school districts must provide an additional exemption for owners who are sixty-five or older or disabled.
| School district residence homestead exemption required by Texas Tax Code Section 11.13(b) | $140,000 | Texas Comptroller of Public Accounts, Property Tax Exemptions |
|---|---|---|
| Additional school district residence homestead exemption for owners 65 or older or disabled, Texas Tax Code Section 11.13(c) | $60,000 | Texas Comptroller of Public Accounts, Property Tax Exemptions |
To qualify, the home has to meet the definition of a residence homestead, you must have an ownership interest in it, and it must be your principal residence; an applicant states that no exemption is claimed on another residence homestead in or outside Texas. You claim it on the Comptroller's Form 50-114, filed with your county appraisal district, and the property tax exemptions page has the form. This reduces the Texas property tax your local taxing units charge you, not your federal tax.
Keep four things for the year: the property tax statement, proof of the year the tax was actually paid, receipts for large purchases you add to the sales tax table amount, and the confirmation that the homestead application was filed.
When itemizing actually wins in Texas
Do the arithmetic rather than assume. Property tax plus sales tax alone, capped as they are, often lands under the standard deduction, and in that case itemizing costs you money rather than saving it. Where itemizing tends to win is when something else is in the mix as well — mortgage interest, charitable gifts, or a year of large medical costs. Mortgage interest and Form 1098 is usually the largest of those, so total it first, add the capped taxes, and compare the result against the standard deduction for your filing status before deciding.