Updated October 5, 2026. Quick answer: No. The Texas Constitution says the “legislature may not impose a tax on the net incomes of individuals”, so dividends and interest add no Texas income tax.
How Texas treats dividends and interest
| Item | What the documents say |
|---|---|
| Treatment | Not taxed by the state |
| Where it is written | Individual income tax prohibited: Texas Constitution, Article VIII, Section 24-a |
| Added by | A constitutional amendment the voters decided at an election held on November 5, 2019 (House Joint Resolution 38) |
| Municipal bond interest | No rule needed: no income tax applies to it |
A $20,000 example
Dividends and interest of $20,000 add $0 of Texas income tax. Federal tax on the income still applies.
What changes in 2026
The latest documents read print no 2026 change to the way dividends and interest are taxed.
Federal rules
The state’s treatment sits on top of the federal one. Qualified dividends and ordinary dividends are sorted out on the Form 1099-DIV, as the site explains in Box 1a and 1b: ordinary versus qualified dividends, and interest is reported as covered in 1099-INT Box 1. The IRS explains the federal side in Topic no. 403, Interest Received and Topic no. 404, Dividends.
Related: whether Texas taxes capital gains, whether Texas taxes pensions, how Texas taxes retirement income, dividends and interest tax by state, and how tax-exempt interest is reported.
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Answer againSources
- Texas Constitution, including amendments through the November 4, 2025 election (Texas Legislative Council): https://tlc.texas.gov/docs/legref/TxConst.pdf
- 86(R) H.J.R. No. 38, enrolled version (Texas Legislature): https://capitol.texas.gov/tlodocs/86R/billtext/html/HJ00038F.htm
Sources: the primary documents linked above, read on October 5, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.