Texas franchise tax calculator
Check the 2026 no-tax-due threshold and compare the four margin methods with the EZ computation. It’s an estimate from your numbers, not advice; Krystal checks the real picture on a call.
2026 report, due May 15
No tax due at or below $2,650,000.
Direct costs of products sold. Many service businesses have little or none.
W-2 wages, officer pay and benefits.
Usually $0; only if someone earns over the per-person cap.
Estimated franchise tax
Illustrative$11,585
Using the EZ computation: 0.331% of revenue. That’s $4,165 less than the standard calculation.
Revenue against the no-tax-due threshold
$11,585franchise tax
Revenue is over the no-tax-due threshold.
Revenue against the no-tax-due threshold: $3,500,000
| Mark | Value |
|---|---|
| Revenue against the no-tax-due threshold | $3,500,000 |
| No tax due at or under | $2,650,000 |
The four margin methods
Texas taxes the lowest of these four margins.
- 70% of total revenue$2,450,000
- Revenue − cost of goods sold (lowest)$2,100,000
- Revenue − compensation (capped)$2,600,000
- Revenue − $1,000,000$2,500,000
70% of total revenue: $2,450,000
| Item | Value |
|---|---|
| 70% of total revenue | $2,450,000 |
| Revenue − cost of goods sold (lowest) | $2,100,000 |
| Revenue − compensation (capped) | $2,600,000 |
| Revenue − $1,000,000 | $2,500,000 |
The four margin methods
Texas taxes the lowest of these four margins.
| Method | Margin |
|---|---|
| 70% of total revenue | $2,450,000 |
| Revenue − cost of goods sold (lowest) | $2,100,000 |
| Revenue − compensation (capped) | $2,600,000 |
| Revenue − $1,000,000 | $2,500,000 |
| Approach | Tax |
|---|---|
| Standard calculation | $15,750 |
| EZ computation (0.331%, no deductions) | $11,585 |
Estimates use 2026 report-year figures from the Texas Comptroller. COGS eligibility has detailed rules (Tax Code § 171.1012), and service businesses often can’t deduct COGS. The PIR or OIR filing is required even when no tax is due. This is not tax advice.
Method
How the estimate works.
What the calculator compares
Texas taxes the lowest of four margins. The calculator works out all four, applies your Texas share, then multiplies by your rate and compares the result with the EZ computation.
- 70% of total revenue
- Total revenue minus cost of goods sold
- Total revenue minus compensation, capped at $480,000 per person
- Total revenue minus $1 million
Rates and thresholds
- No tax due at or below $2,650,000 of annualized total revenue (2026 reports).
- 0.375% for retail or wholesale; 0.75% for everything else.
- EZ computation: 0.331% of Texas-apportioned revenue, no deductions, available up to $20,000,000 of revenue.
- Reports are due May 15.
What it leaves out
- The detailed COGS rules in Tax Code § 171.1012; service businesses often can’t deduct COGS.
- Combined group reporting and the full apportionment rules.
- Credits, penalties and interest.
Krystal covers those on a call.
FAQ
Texas franchise tax questions.
Who has to file a Texas franchise tax report?
Every taxable entity formed or doing business in Texas — LLCs, corporations, S-Corps, partnerships (except most general partnerships owned solely by individuals), and professional associations. Sole proprietorships are not subject to franchise tax. Since 2024, entities under the no-tax-due threshold no longer file a No Tax Due Report, but they must still file a Public Information Report (PIR) or Ownership Information Report (OIR) by May 15.
What is the no-tax-due threshold for 2026?
For reports due in 2026, entities with annualized total revenue of $2,650,000 or less owe zero franchise tax. You still must file the information report (PIR/OIR) to keep your entity in good standing.
How is the franchise tax margin calculated?
Your taxable margin is the LOWEST of four calculations: 70% of total revenue, total revenue minus cost of goods sold, total revenue minus compensation (capped at $480,000 per person for 2026 reports), or total revenue minus $1 million. The margin is then apportioned to Texas and multiplied by your rate — 0.375% for retail/wholesale, 0.75% for everything else.
What is the EZ computation?
Entities with $20 million or less in annualized total revenue can elect the EZ computation: 0.331% of Texas-apportioned revenue with no deductions for COGS or compensation. It is simpler, but not always cheaper — businesses with large COGS or payroll usually do better with the standard calculation. This calculator compares both.
What happens if I miss the May 15 deadline?
Texas charges a $50 late filing penalty per report, plus a 5% tax penalty (10% after 30 days) and interest on unpaid tax after 60 days. Repeated non-filing leads to forfeiture of your entity's right to transact business in Texas.
Does Texas have a state income tax?
No — Texas has no personal or corporate income tax. The franchise ("margin") tax is the state's primary business levy, and most small businesses under the $2.65M threshold owe nothing beyond the annual information report.
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