Texas Franchise Tax (Margin Tax): 0.75% of taxable margin for most businesses (0.375% for retail/wholesale). Applies to most LLCs and corporations. No individual income tax.
Key Planning Insight:
Texas has no individual income tax and no capital gains tax. The Texas Franchise Tax (Margin Tax) applies to most business entities — planning around the taxable margin calculation is critical. Bonus depreciation fully conforms at the federal level.
Texas-Specific Tax Strategies
These strategies are especially powerful or unique in Texas. Click any strategy to learn more.
Texas Franchise Tax (Margin Tax) applies to most businesses at 0.75% of taxable margin (0.375% for retail/wholesale). Planning strategies include choosing the most favorable margin calculation method (70% of revenue, revenue minus COGS, revenue minus compensation, or $1M no-tax threshold), entity structuring, and revenue sourcing.
Tax-loss harvesting involves selling investments at a loss to offset capital gains and up to $3,000 of ordinary income per year. Unused losses carry forward indefinitely. This strategy is especially powerful when combined with portfolio rebalancing and can significantly reduce your annual tax bill.
Texas has no individual income tax, making it one of the most popular states for domicile planning. Establishing Texas residency eliminates state income tax on all personal and business income. Key steps include obtaining a Texas driver's license, registering to vote, and filing a homestead exemption.
Bonus depreciation allows you to deduct a large percentage of qualifying business assets (equipment, vehicles, real estate improvements) in the year of purchase rather than depreciating over time. This is one of the most powerful accelerated deductions available to business owners and real estate investors.
S-Corp owners must pay themselves a "reasonable salary" subject to payroll taxes (15.3%), but remaining profits distributed as shareholder distributions avoid self-employment tax entirely. Optimizing the salary-to-distribution ratio is one of the most impactful tax strategies for business owners earning $60,000+ in net profit.
Texas offers one of the strongest homestead exemptions in the country: unlimited acreage (10 acres urban, 100 acres rural), strong creditor protection, and property tax exemptions. The general homestead exemption reduces school district taxes by $100,000 of assessed value. Seniors and disabled homeowners get additional freezes.
Choosing the right business structure is the single biggest tax decision you'll make. Here's what Texas LLC and S-Corp owners need to know.
Texas LLC Formation
Texas has no state income tax, making it one of the most LLC-friendly states in the country. LLCs here avoid state-level pass-through income tax entirely — your only tax exposure is federal.
LLC vs. S-Corp in Texas
Texas does not currently offer a PTET election. LLC owners should focus on S-Corp election to reduce self-employment taxes, and maximize federal deductions like Section 179, home office, and retirement contributions.
Top LLC Write-Offs in Texas
Texas LLC owners can deduct: business expenses (IRC §162), home office (IRC §280A), vehicle mileage (IRC §179), Section 179 equipment expensing, bonus depreciation (100% federal conformity), retirement contributions (Solo 401k or SEP-IRA), health insurance premiums, and business meals.
Texas Business Tax Note
Texas Franchise Tax (Margin Tax): 0.75% of taxable margin for most businesses (0.375% for retail/wholesale). Applies to most LLCs and corporations. No individual income tax.
These federal strategies apply to Texas residents and business owners. Click any strategy to see full details, savings estimates, and eligibility requirements.
Common questions about Texas LLC taxes, S-Corp elections, and business write-offs — answered by Uncle Kam's tax advisors.
No. Texas is one of the states with no individual income tax. This means business owners and self-employed individuals only pay federal income taxes on their earnings. However, you should still maximize federal deductions — strategies like S-Corp election, Section 179, and Solo 401(k) contributions are especially valuable here.
The most powerful write-offs for Texas LLC owners include: the S-Corp election to reduce self-employment taxes, Section 179 and bonus depreciation for equipment and real estate, the home office deduction, vehicle and mileage deductions, Solo 401(k) or SEP-IRA contributions, and business meals and travel. Texas-specific strategies like the PTET election and state-specific credits can add further savings.
Texas does not currently offer a pass-through entity tax (PTET) election. However, there are still powerful federal strategies available to Texas business owners to reduce their overall tax burden. Book a free strategy call to explore your options.
Yes. Texas conforms to federal bonus depreciation rules, meaning you can deduct a large percentage of qualifying business assets in the year of purchase. This is especially powerful for real estate investors using cost segregation studies and for businesses purchasing equipment or vehicles.
For most Texas business owners earning over $60,000 in net profit, electing S-Corp status can save $5,000–$20,000 per year in self-employment taxes. The right choice depends on your income level, Texas's franchise or minimum tax requirements, and your business structure. Uncle Kam's advisors specialize in Texas entity structuring — book a free call to get a personalized recommendation.
Self-employed individuals in Texas can reduce state taxes by: maximizing business deductions (home office, vehicle, equipment), contributing to a Solo 401(k) or SEP-IRA, electing S-Corp status to reduce self-employment tax, using the PTET election if available, and timing income and deductions strategically. A Texas-based tax strategy session with Uncle Kam can identify your biggest opportunities.
Real estate investors in Texas benefit most from cost segregation studies (accelerating depreciation on commercial and rental properties), the 1031 exchange (deferring capital gains on property sales), bonus depreciation (if Texas conforms), the short-term rental loophole, and real estate professional status (REPS). Texas's specific tax rules can significantly impact your real estate ROI — get a free strategy review from Uncle Kam.
