The 2025 picture for Texas residents
Texas has no state income tax, so the 2025 tax picture for its residents was entirely federal: ordinary rates up to 37%, capital gains up to 23.8%, and federal Medicare taxes. That was the structural advantage that drove tech-employee relocations into Texas throughout the decade.
2025 supplemental withholding
The federal 22% flat supplemental-withholding rate applied to RSU vests up to $$1,000,000 of year-to-date supplemental wages. Above that threshold, the rate stepped up to 37%. A senior tech earner in $Texas receiving $300k of base and $400k of RSU income $ typically under-withheld by tens of thousands and covered the gap through Q4 estimated payments or additional W-4 withholding.
Safe harbor in 2025
The safe-harbor rule in 2025 required paying either 90% of current-year tax or 110% of prior-year tax (for AGI above $150k) to avoid underpayment penalties under IRC §6654. Many equity earners in Texas relied on the 110%-of-prior-year route because current-year tax was hard to estimate before the Q4 vest.
Frequently asked
- What supplemental-wage withholding rate applied to RSU income in Texas in 2025?
- The federal supplemental-wage withholding rate was 22% on the first $1,000,000 of supplemental wages per calendar year, rising to 37% above that. Texas does not impose a state income tax on wages, so no state withholding applied.
- Did Texas recognize federal QSBS exclusion in 2025?
- Texas has no state income tax, so QSBS eligibility affects only federal tax. Federal Section 1202 treatment applied in 2025 identically for Texas residents.
- What was the top federal ordinary bracket in 2025, and how did it apply to Texas residents?
- The 37% federal ordinary bracket started around $626,350 of taxable income for single filers in 2025. Texas added nothing at the state level, producing a combined top marginal rate of approximately 37%.