How does Texas state income tax and unemployment insurance work in 2026?
Texas has no state income tax and no state payroll tax. What employers fund instead is unemployment insurance on a $9,000 wage base at a 2.70% new-employer rate, plus the federal stack.
· Texas, United States guide
Illustration · Austin, Texas
Texas is the state that looks free on a relocation slide and reads almost as simply on a payroll register. There is no state income tax and no withholding form, because the Texas constitution bars a personal income tax. There is also no state payroll tax. That part is genuinely simple.
Your employer cost sits in one state box and the federal stack. Unemployment insurance runs on a $9,000 wage base at a new-employer rate of 2.70%, so a maximum of about $9,000 times that rate per employee a year. On top sits Social Security, Medicare and FUTA, the same in every state.
Does Texas have a state income tax in 2026?
No. Texas is one of nine US states with no personal state income tax. The state constitution bars one outright, so you run zero state income tax withholding on your Texas payroll in 2026. There is no Texas equivalent of a state W-4 and no state bracket table to maintain.
That does not mean no employer cost. Texas funds its government through sales and property taxes, so on payroll your only state line item is unemployment insurance. The federal stack still applies in full.
For your Austin hire, no state income tax is real take-home: they keep more of the same gross salary than a hire in California or New York. For you, the withholding side of payroll is among the easiest in the country, because there is nothing to withhold for the state and no state reconciliation return to file. Compare that with neighbouring Louisiana, where you run up to four state income tax brackets.
Texas voters locked this in. Proposition 4 in 2019 amended the constitution to prohibit a personal income tax outright, so it would take a statewide referendum to change. The one trap is assuming "no income tax" means "no Texas payroll obligation". You still register with the Texas Workforce Commission for unemployment insurance, and you still run the full federal stack. For a full picture of what you owe as the employing entity, see Teamed's United States hiring guide.
Does Texas have a state payroll tax, and what do employers pay instead?
No. Texas has no state payroll tax and no state disability levy. Your only state-level employer cost on payroll is unemployment insurance, paid to the Texas Workforce Commission on the first $9,000 of each employee's wages.
The Texas employer story is short: one state contribution, unemployment insurance, then the federal stack of Social Security at 6.2%, Medicare at 1.45%, and FUTA.
This is what makes Texas light to run. States like Nevada bolt on a Modified Business Tax, and California adds disability and employment-training levies. Texas adds nothing of the kind. Your state payroll obligation begins and ends with unemployment insurance. See the wages and hours picture in the Texas wages, overtime and meal break guide.
Register with the Texas Workforce Commission within 10 days of becoming liable, then report wages and pay UI each quarter via the TWC employer portal. There is no monthly state withholding deposit, because there is nothing to withhold. The work is the federal stack plus one quarterly UI return, which is why a Texas payroll runs lighter than almost anywhere else in the country.
What is Texas's unemployment insurance wage base and rate for 2026?
Texas's UI taxable wage base is $9,000 per employee for 2026, fixed by statute and unchanged year to year. New employers pay a UI rate of 2.70%, the greater of that rate or your industry average, set by the Texas Workforce Commission.
Experienced employers land on a rate built from their own claims history, running from a 2026 minimum of 0.32% to a maximum of 6.32%. At 2.70% on a $9,000 base, you pay at most about $243 per employee a year as a new employer.
Your UI taxable wage base is $9,000 per employee. New-employer rate: 2.70%. Once experience-rated, you land between 0.32% and 6.32%. Report and pay quarterly via TWC.
The $9,000 base is among the lowest in the country, and because it does not move with wages, your per-employee UI is capped. You pay UI on the first $9,000 of each employee's wages; everything above that in the calendar year is exempt. Contrast that with Oklahoma, where the UI wage base runs higher.
A new employer holds the 2.70% entry rate until it has enough chargeback history to be experience-rated, then moves onto a rate built from five components the TWC publishes each year. The federal layer sits on top: FUTA is 6.0 percent on the first $7,000 of wages, less the full credit for compliant state payers, leaving an effective 0.6%. Use the employer cost calculator to see your full Texas cost in seconds.
What other payroll rules apply to Texas employees?
You run the full federal stack: Social Security at 6.2% to $184,500, Medicare at 1.45%, and FUTA at an effective 0.6%. Texas's minimum wage is the federal $7.25 an hour, with a $2.13 tipped cash minimum.
Texas mandates no state paid leave. There is no state paid-family-leave programme and no state paid sick leave, so federal FMLA at 50 employees is the only job-protected family leave layer.
Two points catch out-of-state employers. First, the minimum wage: Texas adopts the federal $7.25 by reference and bars cities from setting a higher local rate, so Austin, Houston and Dallas all sit at the same floor. Tipped staff can be paid a $2.13 cash wage as long as tips bring them to $7.25. See detailed wage and hour rules in the Texas wages and overtime guide. Second, leave: Texas has no state mandate at all, so any paid time off you offer is a benefit you choose, not a statute you follow. The full leave picture is in the Texas paid leave guide.
That makes federal FMLA the whole of the job-protected family-leave picture: up to 12 weeks of unpaid, job-protected leave for employers with 50 or more staff within 75 miles. Social Security runs at 6.2% each side to $184,500, Medicare at 1.45% on all wages, and a 0.9 percent additional Medicare applies to employee wages over $200,000. For at-will rules and what changes those, see the Texas termination and at-will guide.
How Teamed runs Texas payroll end to end
Teamed becomes your legal employer of record in Texas for $599 per employee per month flat. Zero FX mark-up. Statutory employer cost passes through itemised on every invoice.
You hire the person. Teamed registers with the Texas Workforce Commission, files and pays unemployment insurance each quarter, and runs the full federal stack. Everything runs on one platform.
Real HR and legal experts handle your Texas hires and know the $9,000 UI wage base, the 2.70% entry rate, and the quarterly TWC cadence by heart. An actual person, not a chatbot or a pooled queue. You see every cost: unemployment insurance and federal employer taxes pass through at cost, itemised and auditable on every invoice. No setup fee, no exit fee.
Contractor onboarding, EOR payroll, and entity graduation all live on one platform: a Texas contractor who converts to W-2 keeps their record, and that same employee can graduate to your own US entity without switching systems. Because Texas has no income tax, no state payroll tax, and a $9,000 UI base, the running cost of a Texas hire is low, so the crossover point arrives later per headcount than in a high-tax state. Use the Crossover Calculator to see the month the model flips. EOR is the right model for Texas, until it isn't. When the model no longer fits, talk to an expert about the transition.
The mistake we see on Texas is the opposite of the usual one. People assume no income tax means hidden costs somewhere, so they over-budget. There is no state payroll tax to find. The only state line is unemployment insurance on a small wage base. Budget for that and the federal stack, and you have the whole picture.
Texas has no state income tax and no state payroll tax.
Your only state line is unemployment insurance: 2.70% on a $9,000 base, then the federal stack.
One of the lightest payrolls in the country. Teamed runs it for $599 flat, zero FX mark-up.
