Texas Tax Strategy

Texas Business Tax Strategy

Zero income tax. New R&D credit expansion. But the franchise tax and sky-high property taxes demand planning.

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Texas Tax Snapshot

None Tax
Top Marginal Rate
None
No state individual income tax. Constitutional prohibition. High property taxes partially offset the advantage.
SALT Impact
Low
Relatively low SALT exposure for business owners.
Tax Foundation Ranking
#7 of 50
Above average tax competitiveness.
Pass-Through Entity Tax
Not Available
No PTET needed -- no state individual income tax.
Key Takeaway

Texas's 2026 R&D credit increase to 8.722% (up from 5%) is a major development. Combined with no income tax, it rewards growth-stage businesses.

Business Tax Landscape

Texas Business Taxes

Beyond income tax, Texas business owners need to account for these additional tax obligations and structures.

Franchise Tax Gross Receipts Tax State R&D Credit
Franchise (margin) tax: 0.375% retail/wholesale, 0.75% other businesses on revenue over $2.47M. No corporate income tax.
Available Credits

Key Incentives & Credits in Texas

These state-level incentives can meaningfully reduce your tax liability when properly claimed.

R&D tax credit (8.722% base, 10.903% for university research, effective 2026)

Texas Enterprise Fund

Chapter 313 property tax limitations (successor program)

Film and media production incentives

Skills Development Fund

Opportunity Zones

No individual income tax

Recommended Approach

Strategies That Work in Texas

Based on Texas's tax profile, these are the strategies with the highest impact for business owners.

S-Corp Optimization

Proper S-Corp salary vs. distribution splits can save five figures annually on self-employment and state taxes.

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Cost Segregation

If you own commercial real estate or rental property, accelerated depreciation can generate massive year-one deductions.

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Federal Tax Optimization

With no state income tax, your primary savings come from federal strategies: retirement contributions, Qualified Business Income (QBI) optimization, and timing.

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R&D Tax Credits

Texas offers its own R&D credit in addition to the federal credit. Many business owners leave this money unclaimed.

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Industry Expertise

Industries We Serve in Texas

We work with Texas business owners across these industries, each with unique tax planning opportunities.

Common Questions

Texas Tax Strategy FAQ

Texas does not impose a state individual income tax, making it one of the most tax-friendly states for business owners. However, corporate-level taxes and federal obligations still require careful planning.

Texas does not currently offer a pass-through entity tax election. Since there is no state income tax, a PTET is not necessary.

Even without state income tax, Texas business owners benefit from federal strategies: S-Corp optimization, retirement plan design, cost segregation, and entity structuring. The savings are in the federal code.

Texas offers several valuable credits and incentives: R&D tax credit (8.722% base, 10.903% for university research, effective 2026), Texas Enterprise Fund, Chapter 313 property tax limitations (successor program), and more. The state R&D credit is particularly valuable for businesses investing in innovation. Many of these go unclaimed because business owners don't know they qualify.

Our Tax Intelligence Framework engagement starts with a free assessment to identify your specific opportunities. Implementation pricing depends on complexity, but our clients typically see 5-10x return on their investment. A Texas business owner doing $1M+ in revenue commonly saves $50K-$200K+ in the first year alone.

Tax Intelligence Review

Texas Business Owner?

Get a free assessment and we'll identify the state-specific opportunities hiding in your numbers.

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Tell us about your business and we'll identify every savings opportunity available to you.

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