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State guide · Texas · 2026 rules

S corporation in Texas: what the election changes

In Texas the S-corp decision is almost all federal. The state adds unemployment tax on your salary and little else.

Updated October 24, 20266 official sources

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You’ll need: last year’s Schedule C (line 31) and the W-2 from any job you also hold. Everything else starts at a typical value you can change.

Each state treats the election differently. The check shows only the questions that matter there.
Your business's profit after expenses. Money you take out for yourself does not lower it.
Where do I find this?

Schedule C, line 31 (“Net profit or (loss)”) on last year’s return.

For this year: sales minus business expenses so far, scaled to a full year. Owner draws are not an expense.

What you would pay yourself through payroll. The IRS expects a reasonable salary for the work you do.
Where do I find this?

No form shows this yet: you choose it. It should be about what you would pay someone else to do your work.

The salary finder just below shows what employees in your job earn in your state or metro area. What the IRS looks at.

Salary finder: what people in your job earn (BLS)
Pick the job closest to what you do most of the week.
Pick your metro area if it is listed. Pay varies by area.
Another job
Typical values: change them if you know yours
Published one-person prices: $492 to $684 a year (October 2026).
Where do I find this?

Your payroll provider’s price page or quote, for one employee: you. Published prices compared.

A survey average: the fee for Form 1120-S minus the fee for Schedule C (2020 fees).
Where do I find this?

Ask your preparer what a Form 1120-S (the S corporation’s own return) would cost, then subtract what you pay now for Schedule C.

Not sure? Keep 22%. It changes line 5 only.
Where do I find this?

Your taxable income is on Form 1040, line 15. Find the rate for that income and your filing status in the IRS rates and brackets table.

Changes the result only above $200,000 of earnings ($250,000 if married filing jointly, $125,000 if married filing separately).
Where do I find this?

The box checked under Filing Status at the top of your Form 1040.

Choose a state and enter your profit and salary to see the comparison.

The franchise tax does not change

Texas has no personal income tax. Its franchise (margin) tax applies to an LLC whether it is disregarded or taxed as an S corporation, so the election changes neither whether the business is taxable nor the rate. No tax is due at or below $2,650,000 of total revenue for 2026 and 2027 reports.

A sole proprietorship with no LLC is not a taxable entity. Forming an LLC or corporation to elect brings an annual information report even when no tax is due.

Unemployment tax on your salary

Unemployment insurance: 2.70% for a new employer on the first $9,000 of wages in 2026. The Texas Workforce Commission says wages a corporation or LLC pays its officers or members are reportable regardless of how the IRS treats the entity.

Worked examples

A single-member LLC owner, single filer, 22% federal bracket, default payroll and return costs. The figure is total tax and added costs as an S corporation compared with staying as you are.

Profit / salaryStatewide
$80,000 / $45,000$735 lower
$120,000 / $60,000$3,136 lower
$200,000 / $90,000$7,916 lower

Starting payroll in Texas

Register for unemployment tax with the Texas Workforce Commission. There is no state income tax withholding.

New hire paperwork for Texas

Other states

All state guides and the map

Sources

Federal figures: IRS Publication 15 (2026), Schedule SE and Form 2553 instructions. Every figure was read on an official page and checked a second time. Checked October 24, 2026. How we check facts.

An estimate from public rules, not tax advice.

Ready to elect? See the Form 2553 steps.

Electing S corp status