Updated October 5, 2026. Quick answer: No. Texas does not tax trust income, because its constitution says the legislature “may not impose a tax on the net incomes of individuals” and the Comptroller says the state has no personal income tax.
How Texas treats trust income
| Item | What the documents say |
|---|---|
| Treatment | Texas has no personal income tax, and the Comptroller says so directly. The source says: “Texas does not have a personal income tax”. That statement appears in a 2016 Comptroller publication. |
| Where the no-tax rule is written | Article VIII, Section 24-a of the Texas Constitution, titled Individual Income Tax Prohibited, says the legislature “may not impose a tax on the net incomes of individuals”. The section text does not mention trusts or estates. |
| Rate on trust income | No state income tax rate applies to trust income, so no trust rate schedule exists in the documents read. |
| Distribution deduction | With no state income tax on trusts or individuals, there is no state distribution deduction to apply. |
| Nonresident trusts | The documents read set no state income tax on any trust, resident or nonresident. |
| What Texas taxes instead | The Comptroller describes the franchise tax as the state’s main business tax, and some trusts can be taxable entities for it. The source says: “Are grantor trusts subject to the franchise tax? Yes, unless”. The Comptroller also lists certain grantor trusts and estates of natural persons among entities not subject to franchise tax. |
| Capital gains | A 2025 constitutional amendment, Section 24-b, bars a tax on capital gains of trusts and estates: the legislature “may not impose a tax on the realized or unrealized capital gains” of an individual, family, estate, or trust. |
| Return to file | The documents read describe no Texas income tax return for trusts. |
A $10,000 example
A trust with $10,000 of taxable income owes $0 of Texas income tax on it. Federal tax on the trust’s income still applies.
Where a trust is administered does not by itself settle the question: other states tax a trust by who created it or who benefits from it, as the by-state table on state taxation of trust income shows.
What changes in 2026
Section 24-b of Article VIII, added Nov. 4, 2025, bars a tax on capital gains of an individual, family, estate, or trust.
Federal rules
The state’s treatment sits on top of the federal one. The federal brackets a trust faces are laid out in trust tax brackets versus individual brackets, and capital gains that a trust keeps are covered in capital gains stay in the trust. The IRS explains the federal return in the About Form 1041 page.
Related: how Texas taxes retirement income, whether Texas taxes pensions, what a living trust costs in Texas, trust income tax by state, and federal trust tax brackets.
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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
- Franchise Tax Frequently Asked Questions: Taxable Entities (Texas Comptroller of Public Accounts): https://comptroller.texas.gov/taxes/franchise/faq/taxable-entities.php
- Franchise Tax Overview (Texas Comptroller of Public Accounts): https://comptroller.texas.gov/taxes/publications/98-806.php
- Starting a New Business, Fiscal Notes, February 2016 (Texas Comptroller of Public Accounts): https://comptroller.texas.gov/economy/fiscal-notes/archive/2016/february/starting.php
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.