The $2.65 Million Ceiling: Texas franchise tax threshold 2026

Everything is bigger in Texas, including the tax exemptions. For the 2026 report year (based on your 2025 business activity), the Comptroller has raised the Texas franchise tax threshold 2026 to $2.65 million.

This means if your total revenue is under $2.65 million, you owe zero franchise tax. This is a significant increase designed to protect small to mid-sized contractors and freelancers from unnecessary tax burdens.

“No Tax Due” Does Not Mean “No Filing Due”

This is the most common trap for Texas entrepreneurs. Even if you owe $0 because you are under the Texas franchise tax threshold 2026, you must still file a No Tax Due Report (Form 05-163) by May 15th.

The Penalty: Texas is strict. Failing to file this simple informational report can result in a $50 penalty and, more dangerously, the forfeiture of your right to do business in Texas.

The Bank Freeze: If your “Right to Transact Business” is forfeited, your bank may freeze your business accounts until you are reinstated.

Changes to the Compensation Deduction

If your revenue exceeds $2.65 million, you can still lower your tax bill using the “Compensation Deduction.” For 2026, the limit for the compensation deduction has been adjusted to $480,000 per person. This is vital for high-revenue firms like engineering or architectural practices in the DFW metroplex.

Streamlining Your Compliance

At Omnis, we handle these filings automatically for our monthly clients. We track your revenue against the $2.65M cap continuously so you never have to worry about the May 15th deadline.

Conclusion

Stay compliant without the stress. Ensure your franchise tax filings are accurate and on time.

Book a discovery call with Omnis to secure your “Right to Transact Business” in Texas.