Updated October 7, 2026. Quick answer: No. The Texas Comptroller’s Fiscal Notes says “Texas does not have a personal income tax”, so there is no Texas income tax withholding on an IRA or 401(k) withdrawal.
Texas withholding at a glance
| Item | What the documents say |
|---|---|
| Is it required? | No. The Comptroller’s Fiscal Notes says the state has no personal income tax |
| Rate or amount | No rate: no personal income tax |
| How to start or stop it | Nothing to file: the article read names no Texas withholding form |
| Direct rollover | The article read is silent on it; with no Texas income tax described, there is no Texas withholding to avoid |
| Changed for 2026? | No change stated; the article read is from 2016 |
What the Texas documents say
The Comptroller of Public Accounts’ Fiscal Notes, in a February 2016 article for new businesses, says “Texas does not have a personal income tax”. The sentence goes on to say sole proprietorships are exempt from the franchise tax, the state’s main business tax.
The article is about starting a business, not about retirement distributions, and it names no Texas withholding form.
A $50,000 withdrawal: cash in hand or a direct rollover
Take a $50,000 401(k) withdrawal paid to you. The IRS says a taxable eligible rollover distribution paid to you from an employer plan is subject to “mandatory income tax withholding (generally at a rate of 20%)”, which on $50,000 is $10,000 (computed as $50,000 times 20%) held back for federal tax. Texas has no personal income tax, so nothing is held back for Texas: the Texas amount withheld is $0.
The other path is a direct rollover to an IRA or another plan. For federal tax the IRS says “The mandatory withholding doesn’t apply in a direct rollover”. A direct rollover therefore has no Texas withholding to avoid.
What the documents do not say
- The one document read is a 2016 Comptroller article; the Texas Constitution page could not be archived. It says nothing on withholding mechanics, rollovers or any change for 2026.
Common mistakes
- Treating the franchise tax mentioned in the article as a tax on a personal withdrawal; it is a business tax.
- Citing a 2016 article as a current Texas Comptroller position on withholding; it only states that there is no personal income tax.
Related: how Texas taxes 401(k) and IRA withdrawals, Texas retirement taxes, retirement withholding calculator, and retirement taxes by state.
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Answer againSources
- Starting a New Business (Fiscal Notes, February 2016): https://comptroller.texas.gov/economy/fiscal-notes/archive/2016/february/starting.php
- IRS Tax Topic 413, Rollovers from retirement plans: https://www.irs.gov/taxtopics/tc413
Sources: the primary documents linked above, read on October 7, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.