Texas Capital Gains Tax: None (Constitution Bans It)

If you sell stock, a rental property or a business in Texas, the state itself takes nothing from the gain. That is now written into the state constitution, not just current practice. This guide shows the constitutional text, what is left (the federal tax), and a worked example that we computed ourselves.

What the Texas Constitution says

Two sections of Article VIII matter here. Section 24-a, titled "Individual Income Tax Prohibited", says the legislature may not impose a tax on the net incomes of individuals, including an individual's share of partnership and unincorporated association income. It was added on 5 November 2019, and the older Section 24 was repealed the same day.

Section 24-b, titled "Capital Gains Tax Prohibited", was added on 4 November 2025. It says the legislature may not impose a tax on the realized or unrealized capital gains of an individual, family, estate or trust, including a tax on the sale or transfer of a capital asset that is payable by the seller or transferor.

What Section 24-b does not change: it states that it may not be construed as modifying an ad valorem (property) tax, a sales tax on goods or services, or a use tax. Texas property tax and sales tax therefore remain.

What still applies to a Texas seller

• Federal capital gains tax. The IRS says that when you sell a capital asset, the difference between your adjusted basis and the amount you realized is a capital gain or loss. If you hold the asset more than one year, the gain is generally long-term; one year or less is short-term, taxed as ordinary income.
• Net investment income tax. The IRS notes that individuals with significant investment income may be subject to the net investment income tax (NIIT).
• Estimated tax. The IRS says that if you have a taxable capital gain you may be required to make estimated tax payments.
• Other states. The constitution limits only the Texas legislature. If you sell property located in, or you earn income from, another state, that state's own rules apply and are not covered here.
• Business entities. The Texas Comptroller describes the franchise tax as a privilege tax imposed on each taxable entity formed or organized in Texas or doing business in Texas. This page does not cover how an entity's gains are treated for franchise tax, because the Comptroller page we read does not say; ask the Comptroller or a tax professional if you sell through a company.

Federal rates on a gain, with Texas at $0

For tax years beginning in 2025, the IRS says the rate on most net capital gain is no higher than 15% for most individuals. For a single filer, 0% applies to taxable income up to $48,350 and 15% applies to taxable income above $48,350 up to $533,400; 20% applies above that. Other rates can apply to collectibles (28% maximum), qualified small business stock (28% maximum on the taxable part) and unrecaptured section 1250 gain (25% maximum). These are 2025 figures; the IRS sets new thresholds each year, so check the current topic page before you rely on them.

Newer figures for tax year 2026. Rev. Proc. 2025-32 (section 4.03) sets the 2026 thresholds for taxable years beginning in 2026: for "All Other Individuals" (which includes single filers) the maximum zero rate amount is $49,450 and the maximum 15% rate amount is $545,500, so 0% applies up to $49,450 of taxable income, 15% above that up to $545,500, and 20% above that. The IRS Topic 409 page we read still showed the 2025 figures. We searched the IRS site for a 2027 revenue procedure and did not find one as of 2 November 2026; it is usually published in the autumn, so check the IRS for updated thresholds.

Worked example (our arithmetic, not an official calculation). We fill the 0% band first and then the 15% band, using the 2025 single-filer thresholds above. We ignore deductions, the NIIT, collectibles and everything else.

In each row the Texas column is $0 because Section 24-b bars the tax. Example A: taxable income of $30,000 leaves $18,350 of room in the 0% band ($48,350 minus $30,000), so $18,350 of the $40,000 gain is taxed at 0% and $21,650 at 15%, which is $3,247.50.

Selling a home or inherited property

The Texas ban applies to home sales and inherited assets as it does to any capital asset: the state charges no capital gains tax. The federal rules for a home sale are separate; see our guide to capital gains tax on a home sale and, for inherited property, capital gains tax on inherited property. Texas property tax on the property itself is not a capital gains tax and is not affected by Section 24-b.

Official Sources

• Texas Constitution, Article VIII (Tex. Official): Sections 24, 24-a and 24-b
• IRS: Topic no. 409, Capital gains and losses (page last reviewed or updated 24 September 2026)
• IRS: Rev. Proc. 2025-32 (2026 inflation-adjusted amounts, section 4.03)
• Texas Comptroller: Franchise Tax