Free Tool
Texas Franchise Tax Calculator
Estimate your Texas franchise (margin) tax for 2026. Enter your revenue and costs to compare all four margin methods plus the E-Z Computation — instantly find the lowest tax.
Enter Business Details
Leave blank if not applicable
Leave blank if not applicable
Used to validate the $480,000.00/person cap
Applied Tax Rate
0.750%
Other Entities rate
Tax Estimate
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Enter your total annualized revenue above to see your franchise tax estimate across all calculation methods.
How the Texas Franchise Tax Works
Determine Total Revenue
Total revenue includes all revenue from all sources, annualized for a 12-month period. If revenue is $2,650,000 or less, no tax is due.
Calculate Taxable Margin
Taxable margin is the lowest of four options: 70% of total revenue, revenue minus COGS, revenue minus compensation, or revenue minus $1M standard deduction.
Apply the Tax Rate
Multiply the taxable margin by 0.375% for retail/wholesale entities or 0.75% for all other entities.
Consider the E-Z Computation
If revenue is $20,000,000 or less, you may use the E-Z Computation: total revenue x 0.331%. Use whichever method yields the lower tax.
2026 Franchise Tax Rates at a Glance
Key thresholds and rates for the 2026 report year.
| Item | Value |
|---|---|
| No-Tax-Due Threshold | $2,650,000 |
| Retail / Wholesale Rate | 0.375% |
| Other Entities Rate | 0.750% |
| E-Z Computation Rate | 0.331% |
| E-Z Revenue Limit | $20,000,000 |
| Compensation Cap (per person) | $480,000 |
| Standard Deduction | $1,000,000 |
| 70% Revenue Multiplier | 70% |
Understanding the Texas Franchise Tax
The Texas franchise tax, also known as the margin tax, is an annual tax imposed on most entities doing business in Texas. Unlike a traditional income tax, the franchise tax is based on an entity's taxable margin, which is calculated from total revenue minus certain allowable deductions.
All taxable entities — including LLCs, corporations, limited partnerships, professional associations, and business trusts — that are formed in Texas or do business in Texas are subject to the franchise tax. Sole proprietorships and general partnerships owned entirely by natural persons are exempt. Many business owners setting up shop in Texas find great housing options in Dallas or Fort Worth.
The tax is administered by the Texas Comptroller of Public Accounts. Entities calculate their taxable margin as the lowest of four options: 70% of total revenue, total revenue minus cost of goods sold (COGS), total revenue minus compensation, or total revenue minus $1 million (the standard deduction). The resulting margin is then multiplied by the applicable rate.
For report year 2026, entities with total revenue of $2,650,000 or less owe no franchise tax but must still file required reports. Entities with revenue of $20,000,000 or less may opt for the E-Z Computation, which simplifies the calculation to total revenue multiplied by 0.331%. If you are relocating your business to Texas, search for apartments near your new office or storefront.
Frequently Asked Questions
What is the no-tax-due threshold for the Texas franchise tax? +
What is the E-Z Computation for Texas franchise tax? +
When is the Texas franchise tax due? +
Do LLCs pay franchise tax differently than corporations in Texas? +
What is the compensation cap per employee? +
What qualifies as COGS for the Texas franchise tax? +
Disclaimer: This calculator provides estimates based on publicly available franchise tax rules for the 2026 report year. Actual tax liability may differ based on apportionment factors, credits, and entity-specific circumstances. Always consult with a qualified tax professional and verify current rates with the Texas Comptroller of Public Accounts before making financial decisions.
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