📅 2026 Update: Key Changes in Texas Tax Landscape

Since the original article was published, several states have adopted a Pass-Through Entity Tax (PTET). This tax allows businesses to pay state taxes at the entity level, which can benefit owners by avoiding the federal cap on deductions for state and local taxes. The changes in tax laws may impact your understanding of taxes in Texas, especially if you own a business or are considering forming one.

The earlier article continues below, providing foundational knowledge on federal and state income tax, filing processes, and IRS rules. Here are the key updates relevant to Texas tax and its implications.

🌟 New State-Level Taxes

Several states, including Hawaii, Iowa, Indiana, Kentucky, Maine, Montana, Nebraska, and others, have recently enacted PTETs. These changes reflect a growing trend across the U.S. This may influence future tax policy discussions in Texas, particularly for small business owners.

💰 Current Fees and Costs

As of October 2026, the Connecticut Department of Motor Vehicles has established new fees for vehicle title services. While this change is specific to Connecticut, it highlights potential shifts in state fees that could be seen in Texas as well. Staying informed about local fees is crucial for all taxpayers.

📄 Important Tax Forms

Taxpayers should be aware of forms like Form 3911 for tracing refunds, Form 8716 for automatic extensions of business returns, and Form 1065 for partnerships. Understanding these forms can streamline the filing process and help avoid delays.

⏰ Filing Deadlines

With the filing deadlines for various forms, including Form 1065, typically due on the 15th day of the third month after the partnership's tax year ends, it's essential to mark these dates on your calendar. Meeting deadlines can help avoid penalties and interest charges.

📌 Key Takeaways

  • 🌐 States are adopting Pass-Through Entity Taxes.
  • 💸 New state fees, like those in Connecticut, may signal changes elsewhere.
  • 📝 Important forms include Form 3911, Form 8716, and Form 1065.
  • ⏳ Filing deadlines are crucial to avoid penalties.

💡 Tips for Understanding Texas Tax Rules

It is important to go over the details of your own situation with your attorney. Here are some practical tips to navigate Texas tax rules effectively.

🔍 Understand the PTET

If you own a pass-through business, familiarize yourself with how the Pass-Through Entity Tax works. This could help you maximize deductions and minimize your overall tax burden.

📊 Keep Up with State Changes

Tax laws change frequently. Regularly check for updates on state tax policies that may affect your situation. Staying informed can help you make better financial decisions.

📅 Organize Your Documents

Ensure all necessary documents are organized before filing. This includes income statements, deduction records, and relevant tax forms. Proper organization can help streamline the filing process.

🏢 Explore Free Assistance Programs

Consider utilizing programs like Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE). These services offer free help for eligible individuals and can provide valuable support in preparing your taxes.

📝 Review IRS Resources

The IRS provides a wealth of resources, including the Taxpayer Advocate Service and various online forms. Utilizing these resources can help clarify your rights and responsibilities as a taxpayer.

🏆 Tax Services Ranked by User Reviews (2026)

This section lists various tax services based on user reviews, providing insights into their offerings and customer satisfaction. The order follows Trustpilot data from October 2026, and scores can change over time. Remember, star ratings are just one aspect; unhappy customers often leave more reviews, which can skew perceptions.

🥇 1. Libre Tax Service

Libre Tax Service has been rated 4.1. It is known for its online tax preparation and IRS audit defense services. However, some users have reported challenges with navigating the website, which can impact the user experience.

🥈 2. Jackson Hewitt Tax Service

Jackson Hewitt Tax Service holds a 4.2 rating. This company is recognized for its nationwide tax preparation services, making it accessible for many. Reviewers have mentioned some concerns about customer service responsiveness, which potential clients should consider.

🥉 3. TaxSlayer

TaxSlayer averages 4.0. It is primarily known for its online tax preparation software at affordable prices. Users have reported occasional software glitches, which may affect the filing process.

4️⃣ KBO Tax & Accounting Services

KBO Tax & Accounting Services has received a 4.5 rating. Known for its nationwide tax preparation and bookkeeping services, it caters to a wide range of clients. However, it has limited in-person office locations, which might not suit everyone.

5️⃣ Advanta Tax

Advanta Tax holds a 4.3 score. This service is known for its nationwide tax offerings, including IRS resolution and state tax debt assistance. Some clients have reported delays in service, which could be a consideration for those needing quick help.

6️⃣ SMAART Tax

SMAART Tax has a 4.4 rating. It offers virtual tax services across all 50 states, which provides flexibility for clients. However, its services are primarily online, with limited in-person consultations available.

🆓 Free Government and Nonprofit Help

Taxpayers can access free services through programs like IRS Free File, VITA, and TCE. These services provide assistance to those who need help with tax preparation and filing. Utilizing these programs can save costs and ensure accurate filing.

🔎 Factors to Compare When Choosing a Tax Service

  • 📊 User reviews and ratings.
  • 💼 Range of services offered.
  • 📍 Availability of in-person support.
  • ⏳ Processing times and efficiency.
  • 💰 Cost and potential hidden fees.

❓ Frequently Asked Questions

📋 What is the Pass-Through Entity Tax?

The Pass-Through Entity Tax (PTET) allows businesses to pay state taxes at the entity level. This can provide tax benefits to owners by reducing their federal tax liabilities.

🗓️ When are tax forms due?

Tax forms like Form 1065 are generally due on the 15th day of the third month after the end of the partnership's tax year. It is important to check specific deadlines for accuracy.

💬 How can I trace my tax refund?

To trace your tax refund, complete Form 3911, Taxpayer Statement Regarding Refund. This form helps you request a trace if you have not received your refund.

🔄 Can I get an extension on my business tax return?

Yes, you can file Form 8716 to request an automatic extension for certain business tax returns. Be sure to submit it by the due date of the return you are extending.

📞 Where can I get free tax help?

Free tax help is available through programs like VITA and TCE. These services are designed to assist those who need help preparing their tax returns.

📚 What resources does the IRS provide for taxpayers?

The IRS offers various resources, including the Taxpayer Advocate Service and online forms. Taxpayers can find valuable information to help with their tax filing process.

⚖️ Recent Cases Impacting Texas Tax

Recent court rulings have addressed various aspects of tax law, which may influence Texas taxpayers. These rulings can provide insights into how tax regulations are interpreted and enforced.

For more information on recent rulings, check out more rulings on the news page.

End of October 2026 Update





Tax Exemption Forms

Sales Tax Forms


Form 01-339 Texas Sales and Use Tax Exemption Certification Form 01-156 Texas Use Tax Return Form 01-117 Texas Sales and Use Tax Return (Short)

Property Tax Forms


Form 50-114 Application for Residence Homestead Exemption Form 50-144 Business Personal Property Rendition of Taxable Property

The Texas tax burden, at 7.9% of income is well below the national average of 9.8%.  there is no state income tax, which leads to higher sales and property taxes.  There are also property taxes that must be given consideration.  Tax returns are due on April 15.

Texas state sales/use tax – 6.25%, prescription and non-prescription drugs and non-prepared food exempt, local sales tax can add 2%.

Texas personal income tax


There is no state income tax

Texas excise taxes


Taxes will be assessed on alcohol, tobacco, gasoline and other miscellaneous items, at the discretion of the state.

- $1.41 per package of 20 cigarettes

- $2.40/gallon on spirits

📝 See Also

- $.204 per gallon on table wine

- $.20 per gallon of beer

- Fireworks are taxed at 2% + sales tax, which funds rural fire departments

- $.24/gallon on gasoline

Texas inheritance/estate tax


Only federal laws are in effect.  No state estate tax has been collected on deaths after Jan 1, 2005.  There is no Texas inheritance tax.

Texas payroll taxes


State Disability Insurance – none

State Unemployment Insurance – 0.66% to 8.25%, wage base is $9,000.  New employer contribution is 2.7%.  Construction employers use 5.4%.

State minimum wage follows federal standards.

Texas state property tax


Texas does not impose a property tax, but cities, counties and school districts will.  Vehicles that do not produce income are exempt from taxation.  Intangible property is not taxed.  There is a homestead exemption available for homeowners that live in their property as a primary residence.  Property taxes are comparatively higher to other states due to the absence of personal income taxes.

Texas state corporate tax


Although Texas does not levy a corporate income tax, there is a tax on gross receipts called the Texas margins tax.  Texas is only one of five states that has a gross receipts tax in lieu of a corporate tax rate.

Exemptions


There is a $10,000 property tax exemption to the property’s assessed value for school district taxations.  This can be in addition to a $15,000 homestead exemption.  $3,000 will be exempt from all other local taxes.  School distract taxes are frozen for seniors and the disabled.

The tax ceiling on properties that undergoes renovations is dropped to compensate for the cost of renovations and increased value of the property.

Primary Areas of Concern


Texas is the 2nd most populous American state and curiously, has a lower tax burden than other populated states like California & New York.

Sales Tax


Texas sales taxes are imposed on all sales, leases, and rentals on all goods and most taxable services. Food and clothing are subject to the Texas state sales tax. In addition to the Texas state sales tax, cities and counties reserve the right to add a fraction to revenue to their own coffers. The Texas sales tax rate currently stands at 8.25%. 8.25% percent is the combined total rate of city, county, and state government sales taxes. Texas also imposes various selective sales taxes. The Texas state sales tax on specific commodities mostly pertain to vices like alcohol, gambling

Texas Property Taxes


In Texas, the property tax burden is relatively high. Property taxes are high due to the high population of the state. Texas real estate demand is high; therefore, the government see this as an opportunity to generate revenue. The average Texas property owner pays approximately $1,400 a year in property taxes. This is staggering given the vast wealth of land comprises the state of Texas.

Texas is, geographically, the second largest state. Property taxes, in Texas are not imposed by the state, they are imposed by the county government. Texas is one of 13 states that do not impose property taxes at the state level. Texas property taxes are based on the taxable value of a commercial, industrial, or residential property. Property tax appraisers are county government workers. Texas property owners have a right to appeal real estate appraisals.

The Texas state government even approved the passing of the Property taxpayer's Bill of Rights. The Texas Property Taxpayer's Bill of Rights outlines the right of property owners to appeal the county government's appraisal of land holdings. Equal and uniform property taxation is another right of property owners.

Introduction


Taxes are a part of every citizen's life, and Texas is no exception. Texas tax is a complex system that is comprised of several different types of taxes, including sales tax, property tax, and income tax. However, despite its complexity, the state of Texas has consistently been one of the lowest taxed states in the United States. In this article, we will provide a brief overview of the Texas tax system, discussing the different types of taxes and their rates, including how the state revenue is allocated, and how the taxes affect the state's economy.

Types of Texas Tax


Sales Tax

Texas has a state sales tax of 6.25%, and local municipalities can choose to add an additional sales tax of up to 2%, resulting in a maximum sales tax of 8.25%. However, not all goods and services are taxed equally. For example, grocery items and prescription drugs are exempt from sales tax, whereas prepared food, gasoline, and electricity are all taxed at a higher rate.

In addition, businesses in Texas are required to pay a sales tax on tangible personal property and some services. However, businesses can also receive exemptions on the tax, and there are several incentives for businesses to invest in the state.

Property Tax

Property tax is the primary source of revenue for local governments in Texas. It is collected by counties and is based on the value of the property. Every year, county appraisal districts appraise the value of the properties in their county and send out property tax bills based on the assessed value.

The property tax rate in Texas varies depending on where the property is located, but it is generally higher in urban areas. In 2019, the average property tax rate in Texas was 1.86%. The amount of property tax you pay depends on the value of your property, and the local tax rate.

It is worth noting that the state of Texas does not have a state property tax.

Income Tax

The state of Texas does not have a state income tax, meaning that residents are not required to pay an income tax to the state. Residents of Texas are only required to pay federal income tax. This lack of state income tax is what makes Texas an attractive place for individuals and businesses to live and operate.

However, it is important to note that Texas does have a ""margins tax"" that is applied to businesses that are subject to the state franchise tax. This tax is calculated based on the business's gross receipts and is applied in addition to the federal corporate income tax.

Budget and Revenue Allocation

The state of Texas has a biennial, or two-year, budget cycle, and the budget is proposed by the governor and passed by the state legislature. The budget pays for essential things such as education, healthcare, and public safety, and it is funded by taxes, fees, and other sources of revenue.

One of the primary sources of revenue for the state is the sales tax. In 2019, sales tax revenue made up over half of the state's total tax revenue. Other significant sources of revenue include the federal government, the franchise tax, and the state lottery.

Once the budget is passed, funds are allocated to the various state agencies for their programs and services. In the 2020-2021 biennium budget, education was allocated the highest amount of funding, followed by healthcare and public safety.

How Taxes Affect the Texas Economy

Taxes play a significant role in the economy of any state, and Texas is no exception. Understanding how taxes affect the state's economy can help citizens and businesses understand the impact of various tax policies.

One of the primary ways taxes impact the state's economy is through their effect on the cost of living and doing business. Because Texas has a relatively low tax burden, it is generally more affordable to live and do business in Texas than in states with higher taxes.

This affordability has helped to make Texas an attractive place for businesses to operate, which has resulted in job growth and economic development. In fact, Texas has consistently been one of the fastest-growing states in terms of job growth and population.

Another way that taxes impact the Texas economy is through their effect on state revenue. Taxes are a critical revenue source for the state, and reducing taxes can sometimes lead to a reduction in revenue. Depending on how the state chooses to allocate its funds, a reduction in revenue can have either positive or negative effects on the economy.

For example, reducing the sales tax rate could lead to an increase in consumer spending, which could lead to economic growth. However, reducing the property tax rate could lead to a reduction in revenue for local governments, which could result in reduced public services.

Conclusion


Texas tax is a complex system that is shaped by multiple factors, including the types of taxes, the state budget, and the economic impact of taxes. However, because of the state's relatively low tax burden, Texas has consistently been one of the fastest-growing states in terms of job growth and population.

As the state continues to grow and change, it is likely that taxes will play an increasingly important role in shaping its future. Understanding the Texas tax system and its impact on the economy is essential for citizens, businesses, and policymakers alike.