In our 510,000-path Monte Carlo study of 30-year retirement outcomes, Texas retirees finished at 76.26% success rate (ranked #7 of 51 by success rate, #13 of 51 by lowest median lifetime state tax). Median 30-year state-tax cost: $0. Median terminal balance after 30 years: $1,020,624. No state income tax means the Roth-conversion optimization is purely federal + ACA cliff.
The TX verdict
For a retiree planning withdrawals in 2026, Texas is one of the most retirement-tax-friendly states in the U.S.. No state income tax, but high property tax (~1.6% effective).
Since there is no state income tax, both pre-tax 401(k) distributions and Roth conversions cost $0 in state tax. That removes one variable from the optimization, but it does not eliminate the federal ACA cliff — your premium tax credit still depends on federal MAGI.
Worked example: $30k Roth conversion in Texas
Consider a married couple age 58 in Texas with $75,000 of taxable income, both on ACA Marketplace coverage. They want to convert $30,000 from a traditional IRA to a Roth. In Texas, the state tax on that conversion is $0 (no state income tax). But the conversion pushes their MAGI to $105,000 — over the 400% FPL cliff of $81,760. At roughly 22% federal bracket plus full ACA subsidy clawback (~$12,000), the total cost of converting $30,000 is approximately $18,600 — an effective 62.0% marginal rate. The lesson: in tax-free states, the ACA cliff IS the optimization, not state tax.
Cost breakdown
| Component | Amount |
|---|---|
| Federal income tax (22% bracket) | $6,600 |
| Texas state income tax | $0 |
| ACA premium tax credit clawback | $12,000 |
| Total cost on $30,000 conversion | $18,600 (62.0% effective) |
Scenario B (tax-free): $100k rip-the-bandage conversion in Texas
A retired couple in Texas aged 62 with $60,000 of Social Security and a $1.4M traditional IRA is past the ACA cliff and is no longer on Marketplace coverage. They convert $100,000 in a single 'rip the bandage' year. Federal tax on the conversion: ~$22,400 (mixed 22%/24% brackets after the standard deduction). Texas state tax: $0. Effective cost on the $100,000 conversion: $22,400, or 22.4%. In a no-state-income-tax state, the post-cliff playbook is to convert aggressively in low-spend years rather than dripping small amounts.
What the Monte Carlo data says about Texas
QuantCalc Research ran a 30-year, 10,000-path Monte Carlo simulation for an identical representative retiree (age 60, $2M starting balance, 60/40 portfolio, $80K real annual spend) in each of the 51 U.S. jurisdictions. Here's how Texas compared to the best- and worst-case states:
| Metric | Texas | Wyoming (best) | California (worst) |
|---|---|---|---|
| 30-year success rate | 76.26% | 77.07% | 67.91% |
| Rank (of 51) | #7 | #1 | #51 |
| Median lifetime state tax (30y) | $0 | $0 | $167,580 |
| Median total tax (30y) | $218,400 | $218,400 | $385,980 |
| Median terminal balance | $1,020,624 | $996,189 | $652,555 |
| Δ success vs Wyoming | -0.81 pp | — | −9.16 pp |
Sources: QuantCalc 51-State Monte Carlo Study (2026-05-12) — 510,000 total paths, methodology fully documented and dataset released CC-BY-4.0. Texas's row in the dataset uses the same portfolio + spend + retirement age as every other state — the only variable is state tax treatment.
How Texas treats capital gains in retirement
Texas has no state tax on long-term capital gains. That makes tax-loss harvesting and gain-harvesting decisions purely federal exercises here — you keep the full federal 0%/15%/20% LTCG bracket benefit without a state-level add-on.
Why the ACA cliff hits hard in Texas
The 400% federal-poverty-level cliff is federal, not state-specific — but its dollar impact depends on the benchmark Silver-plan premium in your county. Texas's Marketplace pricing and your household composition determine the size of the subsidy at risk. A two-person household near 400% FPL can easily have $10,000–$15,000 of annual premium tax credit on the line. Under the OBBBA 2026 restoration of the cliff, $1 of additional MAGI above 400% FPL eliminates the entire credit.
For 2026 the 400% FPL threshold is:
- Household of 1: $60,240
- Household of 2: $81,760
- Household of 3: $103,280
- Household of 4: $124,800
Optimal Roth conversion strategy for Texas
The TX-specific playbook depends on tier:
- Identify your cliff distance. Compute MAGI from all income sources (wages, capital gains, interest, dividends, traditional withdrawals). Find your headroom under 400% FPL. Use the live cliff widget above for a quick check.
- Stay under the cliff if you can. In a no-state-income-tax state like Texas, the cliff IS the optimization. Convert just enough to fill out your headroom — every dollar over costs the full federal PTC.
- If you must go over, convert big. Once you've crossed the cliff, additional conversion dollars only cost federal + state tax (no incremental PTC loss). A "rip the bandage" conversion year can be efficient if you have many traditional dollars to move.
- Coordinate with capital gains and the 0% LTCG bracket. Texas has no state tax on long-term capital gains. That makes tax-loss harvesting and gain-harvesting decisions purely federal exercises here — you keep the full federal 0%/15%/20% LTCG bracket benefit without a state-level add-on.
- Plan ahead for IRMAA. The IRMAA Medicare premium surcharge has a 2-year lookback. A Texas resident in their early 60s converting today will see IRMAA implications at 65. See RMD + IRMAA calculator for the lookback math.
State tax basics for Texas retirees
| Question | Texas |
|---|---|
| State income tax | None |
| Number of brackets | No brackets (no income tax) |
| Social Security taxed | No |
| 401(k) / Traditional IRA taxed | No / exempt |
| State estate / inheritance tax | No |
| Retirement-friendliness tier | tax free |
| Notable feature | no state income tax, but high property tax (~1.6% effective) |
| 30-yr MC success rate (rank) | 76.26% (#7/51) |
| Median 30-yr state tax | $0 |
Model your full Texas retirement scenario
Free 10,000-path Monte Carlo with state-specific tax engine, ACA cliff, Roth conversion optimizer, IRMAA lookback — all in your browser, no signup.
Run a free simulation →Related calculators and reading
- All-states retirement tax comparison — see Texas alongside the other 50 jurisdictions.
- ACA Subsidy Cliff Optimizer — find the largest Roth conversion that keeps you under 400% FPL.
- Roth Conversion Optimizer — bracket-fill vs. fixed-amount strategy comparison.
- RMD + IRMAA Calculator — Medicare premium surcharge based on 2-year-old MAGI.
- Safe Withdrawal Rate Calculator — sequence-of-returns-aware withdrawal planning.
- Research: 51-State 30-year Monte Carlo (2026) — full ranking and dataset.
- Research: Monte Carlo ACA Cliff 2026 — 80,000-path study of the cliff cost.
FAQ
Does Texas tax Roth conversions?
Texas has no state income tax, so Roth conversions cost $0 in state tax. The conversion is still a federal taxable event and can still trigger the 400% FPL ACA premium-tax-credit cliff.
What is Texas's 30-year Monte Carlo retirement success rate?
In QuantCalc's 510,000-path Monte Carlo study, a representative retiree in Texas (age 60, $2M balance, 60/40 portfolio, $80K real spend) finished 30 years at 76.26% success rate — ranked #7 of 51 jurisdictions. Median 30-year state tax: $0. Median terminal balance: $1,020,624.
What is the ACA cliff in Texas for 2026?
The ACA premium-tax-credit cliff is a federal threshold, not state-specific. For a household of two in 2026, it sits at 400% of the federal poverty level — $81,760. Crossing it by even $1 of MAGI eliminates the full subsidy under the OBBBA 2026 rules.
Is Texas a good state to retire for tax purposes?
Texas is one of the most retirement-tax-friendly states in the U.S.. No state income tax, but high property tax (~1.6% effective). In our Monte Carlo ranking it placed #7 of 51 jurisdictions.
Does Texas tax Social Security benefits?
Texas does not tax Social Security benefits at the state level.
Does Texas have a state estate or inheritance tax?
No — Texas does not impose a state-level estate or inheritance tax.
How does Texas tax capital gains?
Texas has no state tax on long-term capital gains. That makes tax-loss harvesting and gain-harvesting decisions purely federal exercises here — you keep the full federal 0%/15%/20% LTCG bracket benefit without a state-level add-on.
Last updated 2026-05-16. State income tax data sourced from the Texas Department of Revenue and the Tax Foundation's 2026 state tax facts publication. ACA poverty-level figures from HHS 2026 Federal Register. Monte Carlo numbers from the QuantCalc 51-state research drop (2026-05-12, CC-BY-4.0). This page is educational. Not tax, legal, or financial advice — consult a qualified advisor.