Business
Small Business Tax Guide for Texas
2026 | 7 min read | By My Tax Service Team
Texas is one of the best states for small business, with no state income tax and a business-friendly regulatory environment. But federal tax obligations still require careful attention. My Tax Service breaks it down.
Choosing Your Business Structure
Your business entity type determines how you are taxed:
- Sole Proprietorship: Report on Schedule C. Simplest structure, but you pay self-employment tax (15.3%) on net income.
- LLC: Default taxation as sole proprietor (single member) or partnership (multi-member). Can elect S-Corp taxation.
- S-Corporation: Pass-through entity. Pay yourself a reasonable salary and take additional profits as distributions (avoiding SE tax on distributions).
- C-Corporation: Flat 21% corporate tax rate. Subject to double taxation on dividends.
Key Business Deductions
- Home office expenses ($5/sq ft simplified, up to 300 sq ft)
- Vehicle expenses (67 cents/mile for 2025)
- Business insurance premiums
- Office supplies and equipment (Section 179 deduction up to $1,220,000)
- Professional services (accounting, legal, consulting)
- Marketing and advertising costs
- Employee wages and benefits
- Business travel and meals (50% for meals)
Quarterly Estimated Taxes
Self-employed individuals and businesses must make quarterly estimated tax payments if they expect to owe $1,000 or more. Due dates: April 15, June 16, September 15, and January 15.
Texas Franchise Tax
While Texas has no income tax, businesses with revenue over $2.47 million must pay the Texas franchise (margin) tax. The rate is 0.375% for retail/wholesale or 0.75% for other businesses. Contact My Tax Service for help with your business tax planning.