Flat-Fee Tax Preparation for Texas Residents

Texas has no state personal income tax, but businesses with more than $2.47M in total revenue owe the Texas Franchise Tax (also called the 'margin tax'), calculated as the lesser of several bases including 0.75% of taxable margin for most businesses

The Texas franchise tax has a unique EZ computation option at 0.331% of total revenue for businesses under $20M — choosing the wrong calculation method is common and costly

Texas sales tax is 6.25% state plus up to 2% local for a potential 8.25% combined rate, with complex rules on which services and goods are taxable — a frequent issue for service businesses

Texas real estate transactions involve no state income tax on gains, but the federal capital gains tax fully applies — federal optimization through installment sales, 1031 exchanges, and opportunity zones is critical

TX businesses often have nexus issues in other states — a TX LLC selling into California, New York, or Illinois may owe those states' taxes without realizing it

Oil, gas, and mineral rights income is common in Texas and involves percentage depletion deductions, intangible drilling cost elections, and severance taxes — specialized federal treatment

Because TX has no income tax, TX residents often have higher federal AGI and may benefit significantly from strategies like maximizing retirement contributions, HSA contributions, and qualified opportunity zone investments

TX homestead exemption reduces property tax assessed value, but property taxes in TX are among the highest in the nation (1.5%–2.5% of value) — a real estate investor's single largest ongoing expense

Texas Real Estate Tax

Texas has no state capital gains tax on real estate, making it attractive for investors — but all federal capital gains rules still apply in full. The Texas real estate market (Dallas, Houston, Austin, San Antonio) has seen explosive appreciation, making cost segregation studies increasingly valuable for commercial and residential rental investors to accelerate depreciation. Short-term rental activity (Airbnb, VRBO) triggers hotel occupancy tax obligations in Texas at both state and local levels.

Texas Business Tax

Texas businesses benefit from no personal income tax but must navigate the franchise tax, which applies to virtually all entities including LLCs, corporations, and partnerships. The economic nexus rules mean TX-based businesses selling to other states may trigger income and sales tax obligations in those states — multi-state tax planning is essential for growing TX businesses. Entity structuring (LLC vs. S-corp vs. C-corp) decisions in Texas require careful analysis of both the franchise tax and federal self-employment tax implications.

Do I need to file a Texas state income tax return?

No. Texas does not impose a personal income tax, so there is no Texas individual income tax return to file. You still file a federal return with the IRS. If you own a business entity in Texas that has more than $2.47M in annual revenue, that entity may owe the Texas Franchise Tax and must file a franchise tax report with the Texas Comptroller.

My Texas LLC makes over $1M per year — do I owe the franchise tax?

Yes. Texas LLCs with total revenue over $2.47M (the 'no tax due' threshold for 2024) owe the franchise tax. The tax is calculated on 'taxable margin,' which is the lesser of: total revenue minus cost of goods sold, total revenue minus compensation, 70% of total revenue, or total revenue minus $1M. For service businesses that cannot use the COGS deduction, the compensation deduction often produces the lowest tax. The EZ computation at 0.331% of total revenue is an alternative for smaller businesses.

I sold a rental property in Texas for a large gain — what do I owe?

Since Texas has no state income tax, you owe no state tax on the gain. However, the federal capital gains tax applies in full. Long-term gains (property held over 1 year) are taxed at 0%, 15%, or 20% depending on your income, plus the 3.8% Net Investment Income Tax if your income exceeds $200,000 single / $250,000 married. Depreciation recapture at 25% also applies. Strategies like a 1031 exchange or installment sale can defer or reduce the federal gain.

How does the Texas franchise tax work for my S-corporation?

Texas does not recognize S-corporation status for franchise tax purposes — your TX S-corp is treated as a taxable entity. The franchise tax is based on the entity's Texas-apportioned margin, not its federal taxable income or federal S-corp K-1 allocations. Federal S-corp distributions to shareholders are not taxable at the state level (since TX has no income tax), but the entity-level franchise tax applies. The resulting franchise tax liability is often small but requires annual reporting.