Tax Planning for Texas
Business Owners & Investors.
Texas has no state income tax — but that doesn't mean your tax situation is simple. Between the franchise tax, high property taxes, and complex federal rules for real estate and S-Corps, you need a CPA who focuses entirely on federal strategy.
The Texas Advantage
Living in Texas means you already keep more of what you earn — there's no state income tax eating into your paycheck or business profits. But here's what most Texas taxpayers miss: without a state return to worry about, your CPA should be spending 100% of their energy on federal tax reduction strategies. That's exactly what we do.
Texas does have its own quirks that affect your federal picture. The Texas franchise (margin) tax applies to most businesses and can interact with entity structure decisions in unexpected ways. Property taxes averaging 1.60% statewide (and much higher in Harris, Dallas, and Travis counties) mean real estate investors need aggressive cost segregation and depreciation strategies to offset their carrying costs.
Whether you're running an S-Corp in Houston, managing a rental portfolio in Dallas-Fort Worth, or practicing medicine at Texas Medical Center, we build federal tax strategies that are specifically calibrated for Texas residents.
Texas Tax Quick Facts
State Income Tax
None
Avg. Property Tax
1.60%
Sales Tax
6.25%+
Franchise Tax
0.375–0.75%
Notable Texas Tax Rules
- Texas franchise (margin) tax applies to most businesses with revenue over $2.47M
- No state income tax on wages, self-employment income, or investment income
- Property taxes are among the highest in the nation — averaging 1.60% but exceeding 2% in many metro counties
- Texas is a community property state, which affects how income is reported on federal returns for married couples
- No state capital gains tax — all capital gains are taxed only at the federal level
Texas vs. National Average
| Category | Texas | National Avg. |
|---|---|---|
| State Income Tax | 0% | 4.6% |
| Avg. Property Tax | 1.60% | 1.07% |
| State Sales Tax | 6.25% | 5.09% |
| Business Formation Cost | $300 | $150 |
| State Capital Gains Tax | 0% | 3.5% |
National averages based on Tax Foundation 2025 data. Local rates may vary.
Key Strategies for Texas Residents
S-Corp Optimization
Reduce self-employment tax by $10K–$25K+ annually. Texas's zero income tax makes this a pure federal play.
Learn moreSTR Loophole
Short-term rentals in Austin, DFW, and San Antonio let you offset W-2 income with cost segregation losses.
Learn moreCost Segregation
Texas's high property taxes make depreciation even more valuable. Generate six-figure first-year deductions.
Learn moreRetirement Stacking
Solo 401(k) + Cash Balance Plan can shelter $200K–$350K+ from federal taxes annually.
Learn moreRoth Conversions
No state tax on conversions means lower total cost. Build tax-free retirement wealth faster.
Learn more100% Bonus Depreciation
Permanently restored by the OBBBA. Write off business equipment and vehicles in full the year of purchase.
Learn moreWho We Serve in Texas
Real Estate Investors
Texas's booming rental markets in Houston, DFW, Austin, and San Antonio create massive opportunities for cost segregation, bonus depreciation, and REPS qualification. High property taxes make aggressive depreciation strategies even more valuable.
Learn moreBusiness Owners
S-Corp optimization is critical in Texas. While there's no state income tax, the franchise tax and federal self-employment tax still hit hard. We structure your entity and compensation to minimize both.
Learn morePhysicians
Texas Medical Center in Houston is the largest medical complex in the world. Whether you're on staff, in private practice, or doing locum tenens work, we reduce your federal tax burden through retirement funding, entity structure, and real estate strategies.
Learn moreHigh-Income Earners
Oil and gas executives, tech professionals in Austin, and finance professionals in Dallas — we specialize in reducing federal taxes for W-2 earners through stock compensation planning, Roth conversions, and investment tax strategies.
Learn moreLive in Texas? Let's Reduce Your Federal Tax Bill.
Book a free 30-minute strategy call to see how much you could save. We serve Texas clients 100% remotely — no travel required.
Schedule Your Free CallHow We Work Together
Free Strategy Call
A 30-minute video call to review your situation. We'll identify which strategies apply and estimate potential savings.
Tax Diagnostic & Plan
We review your prior returns, current income, and investment portfolio to build a customized tax reduction roadmap.
Implementation
Entity formation, S-Corp elections, retirement plan setup, cost seg coordination — we execute everything.
Year-Round Advisory
Quarterly planning meetings, mid-year projections, year-end optimization, and unlimited communication.
Potential Scenarios, Potential Savings
Houston RE Investor — Cost Seg & REPS
A Houston-based investor with 8 single-family rentals across Harris County used a cost segregation study to accelerate $340K in depreciation. Combined with REPS qualification (she's a full-time real estate agent), she offset her entire W-2 income and paid $0 in federal taxes on her rental portfolio.
Annual Savings
$52,000
Austin S-Corp Owner — Entity Optimization
A software consultant in Austin earning $420K through his LLC was paying over $24K in unnecessary self-employment tax. We elected S-Corp status, set reasonable compensation at $165K, and saved him $19,400 in SE tax annually — while staying compliant with the Texas franchise tax.
Annual Savings
$46,500
DFW Physician — Multi-Entity Strategy
A cardiologist in the Dallas-Fort Worth metroplex with $680K in W-2 income and $120K in 1099 locum tenens pay. We established an S-Corp for her moonlighting income, funded a Solo 401(k) with $72K, and coordinated cost segregation on her two investment properties to reduce her effective federal rate from 35% to 22%.
Annual Savings
$63,000
Resources for Texas Taxpayers
S-Corp Tax Savings Calculator
Estimate your self-employment tax savings from an S-Corp election.
STR Loophole Guide
How to use short-term rentals to offset W-2 income.
Cost Segregation Explained
Accelerate rental property depreciation for massive tax deductions.
REPS Qualification Guide
Qualify as a Real Estate Professional.
Marginal Tax Rate Calculator
Calculate your federal tax rates.
S-Corp Election Guide
Step-by-step guide to S-Corp election.
Texas Tax Questions
Yes. The Texas franchise (margin) tax applies to most businesses with total revenue exceeding $2.47 million. The rate is 0.375% for wholesale/retail and 0.75% for other businesses. While it's not an income tax, it affects your entity structure decisions — and we factor it into your overall federal + state tax optimization strategy.
No. Since Texas has no state income tax return to file, your CPA's expertise should be focused on federal strategy — not local compliance. We specialize in federal tax planning for high-income Texas residents and serve all clients 100% remotely through secure portals and video calls.
Texas property taxes (often exceeding 2% in metro areas) are deductible on your federal return, but the $40,000 SALT cap (raised from $10,000 by the OBBBA in 2025) limits this deduction for most taxpayers. For real estate investors, property taxes are fully deductible against rental income with no cap. We also use cost segregation to generate additional depreciation that offsets the high carrying cost of Texas properties.
Yes. Texas is one of nine community property states. This affects how income is split on federal returns, particularly for married couples filing separately. It can also create planning opportunities — and pitfalls — that we help you navigate.
Without state income tax complexity, we focus entirely on federal strategies: S-Corp optimization to reduce self-employment tax, cost segregation and bonus depreciation for real estate investors, Solo 401(k) and defined benefit plans for high-income business owners, and Roth conversion strategies for long-term wealth building.
Ready to Keep More of What You Earn?
Texas has no state income tax. Let's make sure your federal strategy is just as optimized. We serve Texas clients 100% remotely.