Texas Payroll & Tax 2026

Texas is one of the small group of states with no state personal income tax. Article VIII Section 24 of the Texas Constitution forbids it, and the Texas Workforce Commission (TWC) does not maintain a state withholding table. Federal payroll tax obligations — FICA, Medicare, federal income tax withholding under Pub 15-T, FUTA — still apply in full. What Texas removes is the second income-tax layer; what it leaves is everything else.

The most important Texas-specific items in payroll are the Texas Unemployment Tax Act (TUTA) administered by TWC, workers’ compensation rules (TX is the only state where private employers can opt out of workers’ comp but accept tort exposure in exchange), and the Texas Payday Law which sets wage-payment timing and final-pay rules.

TWC publishes the SUTA wage base each year. New Texas employers pay a fixed entry rate for their first several quarters of employment; established employers receive an experience-rated rate based on their account’s benefit-charge history. The total TUTA rate combines a general tax rate, a replenishment tax rate, an obligation assessment, an employment training investment assessment, and a deficit tax rate when the trust fund is below targets. Employers should pull the current rate notice from TWC each January rather than apply last year’s numbers.

FUTA credit on Form 940 is generally the full 5.4 percent because Texas has not been a FUTA credit-reduction state in recent years, but operators should confirm against the current IRS FUTA credit-reduction list each January before filing.

• Pay frequency: Exempt employees must be paid at least monthly; non-exempt employees at least semi-monthly.
• Final pay timing: Involuntary discharge must produce final wages within six calendar days. Voluntary quit produces final wages on the next regularly scheduled payday.
• Wage-deduction authorization: Texas requires written employee authorization for most non-tax deductions, including loan-recovery and lost-equipment deductions.
• Minimum wage: Texas does not have a state minimum wage above the federal $7.25 floor. Federal minimum wage applies, and tipped-employee rules under FLSA §3(m) operate as they do at the federal level.

The absence of a state income tax can mislead employers about overall payroll cost. Texas still imposes a franchise tax on entities above the no-tax-due threshold, requires TUTA at experience-rated rates that can climb if claims are filed against an employer’s account, and exposes non-subscriber employers (those that opted out of workers’ comp) to ordinary tort liability for workplace injuries.

Texas also has substantial local sales-tax complexity that does not appear on a paycheck but affects total employee compensation negotiations — net pay in Houston, Dallas, Austin, and San Antonio is not really comparable to net pay in equivalent California cities without adjusting for sales tax and property tax stacks. Payroll cost modelling for Texas should include the TUTA experience-rate path, workers’ comp posture, and any city-specific occupation taxes (e.g., the City of Houston’s certain occupation-licensing fees).

Three patterns dominate Texas payroll inbound questions on PayrollCalculator.us. First, employers using last year’s TUTA rate because they never opened the TWC rate notice that arrived in January. Second, multi-state employers treating a Texas remote employee as “no state withholding” without confirming the employee’s legal residence isn’t actually in a withholding state (e.g., employee moved from Oklahoma in October and still owes Oklahoma tax on the pre-move wages). Third, non-subscriber employers underestimating tort exposure after a workplace injury.

• Texas Payroll Calculator — the actual paycheck-level calculator for Texas.
• Texas state hub — deeper writeup of Texas withholding mechanics.
• 2026 state payroll tax comparison table — how Texas compares to other states.
• 2026 Federal payroll tax rates — FICA, FUTA, and bracket reference that stacks on top of Texas withholding.