Texas has no corporate income tax. Instead it charges the franchise tax — widely called the "margin tax" — a privilege tax on taxable entities doing business in the state. It applies to corporations, LLCs, LPs and similar entities, but generally not to sole proprietorships or natural-person general partnerships.
The margin tax is unusual because you compute your taxable margin four different ways and use whichever is lowest, then apportion it to Texas and apply a low rate.
Estimate your Texas Margin Tax in under a minute.
Open calculatorKey numbers
$2,470,000
No-tax-due (2025)
$2,650,000
No-tax-due (2026)
0.75%
Standard rate
0.375%
Retail/wholesale rate
0.331%
E-Z rate
Revenue ≤ $20M, elective
Who owes it
- Entities with annualized total revenue above the no-tax-due threshold ($2.47M for 2025, $2.65M for 2026) owe tax.
- Below the threshold, no tax is due — but most entities must still file a Public Information Report or Ownership Information Report.
- Sole proprietorships and most general partnerships owned solely by natural persons are not subject to the tax.
How the tax is calculated
- 1Start with total revenue (from your federal return, less Texas exclusions).
- 2Compute margin four ways: 70% of revenue; revenue − COGS; revenue − compensation; revenue − $1,000,000.
- 3Use the lowest of the four as your margin.
- 4Apportion it to Texas (Texas gross receipts ÷ total gross receipts).
- 5Apply 0.75% (or 0.375% for retail/wholesale). Entities under $20M revenue may instead elect the 0.331% E-Z computation.
What's excluded from the base
- The compensation deduction is capped per person ($450k in 2025, $480k in 2026)
- Certain flow-through funds and items excluded by statute from total revenue
- Electing the E-Z computation forgoes COGS, compensation, and all credits
Deadlines & filing
Texas Franchise Tax Report
Long Form 05-158 or E-Z 05-169 (+ PIR 05-102)
Annual. Due May 15.
Recent changes
- 2024: the no-tax-due threshold rose to $2.47M and the standalone No Tax Due Report was eliminated (file a PIR/OIR instead).
- 2026: the threshold rises to $2.65M and the compensation cap to $480,000 per person.
Frequently asked questions
Sources
Administered by Texas Comptroller of Public Accounts. Informational only — not tax advice.