Key figures
Texas payroll
2026, with sources
What a Texas employee adds
No state income tax, no state disability or paid leave program, and no local payroll tax. A company hiring its first Texas employee opens an unemployment tax account with the Texas Workforce Commission, files the quarterly Employer’s Quarterly Report (Form C-3), and reports the hire to the Attorney General’s new-hire registry within 20 days.
UI tax is charged on the first $9,000 of each employee’s wages. A new employer starts at 2.7%, or its industry’s average rate if that is higher, until it has the history for an experience rate; TWC mails the rate notice each year. At 2.7% that is $243 per employee per year.
The Texas Payday Law
TWC enforces paydays, final pay and deductions under the Texas Payday Law, and paydays must be posted where employees can see them.
- Non-exempt employees: paid at least twice a month.
- Exempt employees: paid at least once a month.
- Discharged employees: final pay within 6 calendar days.
- Employees who quit: final pay by the next regular payday.
Deadlines
- Last day of the month after the quarterTWC wage report and UI taxEmployer’s Quarterly Report (Form C-3)
- Within 20 days of hireNew-hire report to the Attorney General
The federal baseline
This page covers what Texas adds. The federal rules underneath it apply here too.
Common questions
Is there any state or local withholding in Texas?
No. Texas doesn’t tax wages and has no city or county payroll taxes, so a Texas employee adds only a TWC unemployment account and a new-hire report to the federal payroll setup.
Do we have to carry workers’ compensation?
Texas is the one state where a private employer can choose not to carry workers’ compensation. A non-subscriber gives up the defenses that coverage provides in an injury lawsuit and must file a notice with the Division of Workers’ Compensation and tell employees in writing.
Payroll next door
- NMNew Mexico payrollGraduated withholding up to 5.9%, UI on a $34,800 wage base, a $12.00 minimum wage with higher local rates, and paid sick leave under the Healthy Workplaces Act — but no paid family leave program.
- OKOklahoma payrollOklahoma withholds at up to 4.5% in 2026 and charges new employers 1.5% on a $25,000 wage base — high for the region. There is no local payroll tax or paid leave program.
- ARArkansas payrollArkansas withholds at up to 3.7% in 2026, has an $11.00 minimum wage, and DWS publishes a $7,000 wage base with a 2.0% new-employer rate. No local payroll tax applies.
- LALouisiana payrollLouisiana withholds a flat 3% from 2025, has no state minimum wage or paid leave program, and taxes the first $7,000 of wages for unemployment in 2026.
How Texas compares
- No tax on wagesStates with no state income tax on wagesTexas: no state income tax on wages. 9 of 51 states are on the list.
- Paid leave payrollStates with a paid leave or disability payroll programTexas: no state program. 16 of 51 states are on the list.
- Local payroll taxStates with city, county or district payroll taxesTexas: state-level only. 14 of 51 states are on the list.
Founder guides on this
- PeopleContractor or employee? Classification for startupsContractor or employee depends on control, not the contract. The IRS test, state rules, 1099s, payroll registration and the cost of getting it wrong.
- ComplianceFirst-year compliance calendar for a Delaware C-corpDelaware franchise tax, 1099s, the federal return, payroll filings, state annual reports and sales tax: the deadlines a young C-corp misses most, by month.
More of the Texas guide
- AccountingAccounting and state tax in TexasCorporate tax, conformity to federal rules, apportionment and what it does to your books
- ReceivablesReceivables and sales tax in TexasSales tax registration, economic nexus, whether SaaS is taxable, and collecting from customers
- PayablesPayables and contractors in TexasPaying vendors and contractors: 1099 filing, use tax, contractor tests and withholding
- ComplianceCompliance and filings in TexasRegistering to do business, annual reports, franchise tax and the filing calendar
- AdvisoryAdvisory: credits and decisions in TexasCredits, incentives and the decisions that are cheaper to get right the first time
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
- Texas Workforce Commission — Unemployment Tax
- Texas Workforce Commission — Tax Rates
- Texas Workforce Commission — New Texas employers
- Texas Workforce Commission — Texas Minimum Wage Act
- Texas Attorney General — Employer New Hire Reporting
- Texas Workforce Commission — Texas Payday Law
- Texas Department of Insurance — Division of Workers’ Compensation
General information for US companies, not tax, legal or accounting advice for yours. Rules and thresholds change; confirm the specifics with a CPA or the agency before you act on them.