Self-Employed Taxes in Texas (No State Income Tax)

No state income tax doesn’t mean no tax — what Texas freelancers still owe the IRS

Texas is one of the best states in the country to be self-employed — there's no state income tax. But that headline lulls a lot of freelancers into a dangerous assumption: that their tax bill is small. It isn't. The federal government still wants its share, and self-employment tax alone is 15.3% before a dollar of income tax. Here's what you actually owe.

General information only, not personal tax advice. Verify with the IRS (irs.gov) and the Texas Comptroller (comptroller.texas.gov) or a licensed tax professional.

The good news, stated plainly

Texas levies no personal state income tax. A freelancer earning the same income in Texas keeps more than one in California or New York, because that entire state-tax layer simply doesn't exist. That's a real, structural advantage — especially as your income grows.

But "no state income tax" is not "no tax". You still face the full federal stack.

What you still owe the IRS

  • Federal income tax on your net profit (reported on Schedule C).
  • Self-employment tax — 15.3% (Social Security + Medicare) on net self-employment earnings, reported on Schedule SE. As a 1099 worker you pay both the employee and employer halves; you can deduct half of it against income tax.
  • Quarterly estimated payments (Form 1040-ES). With no employer withholding and no state return to anchor you, it's easy to forget these — and the IRS charges underpayment penalties if you do. Four due dates a year (verify them).

The one state-level thing to watch: franchise tax

Texas doesn't tax your personal income, but it does have a franchise tax on certain business entities (LLCs, corporations, partnerships). Most small operators fall under the "no tax due" revenue threshold (verify the current figure) and owe nothing — but some entities still have an information report to file. A pure sole proprietor (no separate entity) generally isn't subject to it. If you've formed an LLC, check your obligation with the Comptroller.

Deductions still matter — a lot

With no state tax, your deductions work against your federal income tax and your SE tax. The key ones:

  • Mileage — standard rate per business mile (verify) or actual costs. Texas is big; the miles add up.
  • Home office — simplified ($/sq ft up to 300) or actual.
  • Phone, internet, software, equipment (Section 179) — business-use portion.
  • Self-employed health insurance and QBI (up to 20% of qualified business income).
  • Retirement — SEP-IRA / solo 401(k).

Worked example: a Houston contractor

Marcus nets $80,000 as a 1099 contractor. He owes federal income tax and self-employment tax — but zero state income tax. By tracking $12,000 of legitimate expenses, he reduces both federal taxes, and by paying quarterly he avoids penalties. Compared with an identical freelancer in California, Marcus keeps thousands more purely because of where he files — but he still has to actively manage the federal side, set money aside, and pay on time.

How TaxBot helps Texas freelancers

TaxBot scans receipts into Schedule C categories, tracks mileage, and keeps a live profit figure so you always know what to set aside for each quarterly federal payment. No state return to file is great — TaxBot makes sure the federal side, the part that still bites, is handled.

Your action plan

  1. Don't assume "no state tax" means a small bill — budget for federal + 15.3% SE tax.
  2. Set up quarterly estimated payments and diarise the dates.
  3. Track every deduction — they cut federal and SE tax.
  4. If you have an LLC, confirm your franchise-tax status with the Comptroller.