Texas has no state income tax, so when you sell appreciated real estate the only tax is federal — but that federal bill is still 23.8% on the gain. A 1031 exchange into a Delaware Statutory Trust lets Texas investors defer that federal tax, move from active management to passive institutional real estate, and keep their full equity working.
The Texas tax math
Here's the tax stack on a long-held rental sold for a $1.5M gain (excludes depreciation recapture, taxed separately at up to 25%):
| On a $1.5M gain | Tax |
|---|---|
| Federal long-term capital gains (20%) | $300,000 |
| Net investment income tax (3.8%) | $57,000 |
| Texas state tax | $0 |
| Total if you simply sell | $357,000 |
| Tax if you 1031 into a DST | $0 deferred |
Even with no Texas income tax, the federal bill on a large gain is real — $357,000 on a $1.5M gain — versus $0 now with a qualifying exchange. Run your Texas numbers →
Texas 1031 rules
Rules summarized as of 2026 — verify with your tax advisor.
Conforms to federal §1031
Texas levies no personal income tax, so a sale is taxed only federally; a 1031 exchange still defers the federal 20% capital-gains rate plus the 3.8% net investment income tax.
Withholding at sale
None at the state level.
How gains are taxed
No state income tax — capital gains are not taxed at the state level.
Texas market snapshot
Illustrative — wire to a market-data feed; refreshed quarterly.
Baker 1031 in Texas
Realized (acquired, held, sold) programs on Texas assets. Joined from full-cycle-deals.csv; sponsor-reported, net-to-investor, not independently verified; past performance ≠ future results.
| Program | Sponsor | Avg annual | Equity × | Hold |
|---|---|---|---|---|
| Garden Ridge — Conroe | AEI | 6.59% | 1.08x | 2.87 yr |
| Taco Cabana — Waco | AEI | 9.75% | 2.53x | 13.88 yr |
| Taco Cabana — San Antonio | AEI | 9.96% | 2.13x | 13.17 yr |
| Carino's — El Paso | AEI | 2.25% | 0.64x | 5.92 yr |
| USA Self Storage I, DST — GA | Blue Door | — | — | — |
| Four Seasons Hotel — Austin | Syndicated Equities | 11.96% | 1.94x | 5.86 yr |
| Walgreens — Amarillo | Syndicated Equities | 6.14% | 1.79x | 9.77 yr |
| Tech Ridge — Austin | Bluerock | 28.20% | 2.18x | 2.5 yr |
See every Texas deal in the Data Center →
Current offerings for Texas investors
| Offering | Sponsor | Type | Status |
|---|---|---|---|
| AEI Healthcare Portfolio VII DST | AEI Capital Corporation | Healthcare | Available |
| Blue Door Property II, DST | SmartStop | Self-Storage | Available |
| Blue Door Property III, DST | SmartStop | Self-Storage | Available |
| ExchangeRight Net-Leased All-Cash 20 DST | ExchangeRight | Net Lease | Limited Availability |
| ExchangeRight Net-Leased Portfolio 75 DST | ExchangeRight | Net Lease | Limited Availability |
| Moody Med Center 2 DST | Moody National | Hospitality | Available |
DST sponsors based in Texas
Learn more
Texas FAQ
Does Texas tax capital gains?
No. Texas has no personal income tax, so capital gains from selling real estate are not taxed at the state level. You still owe federal tax — the 20% long-term rate plus the 3.8% net investment income tax, about 23.8% on the gain — which a 1031 exchange can defer.
Is a 1031 exchange worth it if Texas has no income tax?
Yes. Even with no state tax, the federal bill on a large gain is substantial (up to 23.8%), and a 1031 into a DST defers all of it while moving you into passive, professionally managed real estate.
Does Texas recognize 1031 exchanges?
There is no Texas income tax to conform, so federal 1031 treatment governs. A qualifying exchange defers the federal gain in full.
Disclosures
This page is educational and is not investment, tax, or legal advice, or an offer to sell or a solicitation to buy any security. State tax and 1031 rules summarized here are general, current as of 2026, and not tax advice — verify with your CPA and attorney. For accredited investors only. Representatives may transact business only in states where registered or exempt. Securities offered through Aurora Securities, Inc., member FINRA/SIPC; Baker 1031 Investments, LLC is independent of Aurora. Performance shown is sponsor-reported, realized programs only, net of fees, not independently verified, and not indicative of future results.