Texas Payroll Tax Guide: Rates, Rules & Compliance (2026)

Texas added more jobs than any other state in 2025, reaching a record 14.3 million nonfarm positions. Every one of those jobs sits on a payroll, and every employer behind those jobs has federal and state tax obligations to meet, whether they have two employees or 2,000.

Employers in Texas must manage federal payroll obligations alongside the state's Unemployment Insurance tax and navigate one of the most distinctive workers' compensation systems in the US. Get those wrong, and penalties follow.

This guide covers every payroll tax obligation Texas employers face in 2026.

Which service handles Texas payroll taxes and compliance efficiently?

Managing Texas payroll means tracking federal rates that change annually, Texas Workforce Commission Unemployment Insurance (TWC UI) components that shift each quarter, workers' comp compliance decisions, and deposit schedules that depend on your liability level. That's a significant administrative load, even for an experienced payroll team.

Deel Payroll calculates and files your federal and state payroll taxes automatically, flags compliance obligations as they change, and connects payroll directly to HRIS and accounting tools, all on owned infrastructure rather than a patchwork of third-party processors.

Federal payroll taxes in Texas

Before turning to state-specific rules, Texas employers must meet all federal payroll obligations set by the IRS. These apply in every state, including Texas. For a full breakdown of every federal obligation, see our guide to US employer payroll taxes.

FICA taxes: Social Security and Medicare

FICA (Federal Insurance Contributions Act) taxes fund Social Security and Medicare. Both the employer and employee share the cost.

2026 FICA rates:

The Social Security wage base limit for 2026 is $184,500, and there is no wage base limit for Medicare tax. Employers must begin withholding the Additional Medicare Tax in the pay period when an employee's wages exceed $200,000 for the year.

FUTA: Federal unemployment tax

The FUTA (Federal Unemployment Tax Act) rate is 6.0%, applied to the first $7,000 paid to each employee per year. Employers that pay state unemployment taxes in full and on time can receive a credit of up to 5.4%, bringing the effective net FUTA rate to 0.6%.

Texas is not a credit reduction state, so Texas employers receive the full 5.4% credit, meaning the effective FUTA cost is $42 per employee per year at the standard wage base. For a detailed look at how FUTA and SUTA interact, including how state credits reduce federal liability, see our dedicated guide.

FUTA is filed annually on Form 940 (due January 31) but deposited quarterly when liability exceeds $500.

Texas Unemployment Insurance tax (SUI/SUTA)

Every employer with workers in Texas must register with the TWC and pay state unemployment insurance (SUI) tax. This is the primary state-level payroll tax obligation for Texas employers.

What is the Texas SUI tax rate for 2026?

The minimum tax rate for 2026 is 0.32%, and the maximum tax rate is 6.32%. Employers pay unemployment tax on the first $9,000 each employee earns during the calendar year.

New employers are assigned a predetermined rate based on their NAICS industry average or 2.70%, whichever is higher. For 2026, the entry-level rate is 2.70% for all industry groups with no exceptions.

To see how Texas SUI compares to other states, refer to our state-by-state payroll tax guide.

How the Texas UI effective rate is calculated

Your effective UI tax rate is the sum of five components:

How to read this table: The RTR is reduced by the ETIA amount by law, so the ETIA does not increase your total effective rate. The GTR is calculated by multiplying your benefit ratio by the 2026 replenishment ratio of 1.20%.

How does experience rating work?

The State Unemployment Tax Act (SUTA) uses an experience rating system to set each employer's GTR. Newly liable employers continue at their predetermined rate until four chargeable quarters. Employers must pay wages for a minimum of six quarters before receiving an experience rating.

Once you have an experience rating, TWC calculates your GTR using three years of chargeback data. Keeping former employees off UI claims is the most effective way to keep your rate low.

Texas personal income tax

Texas has no state personal income tax. Employers do not withhold any state income tax from employee paychecks.

Employers do still withhold federal income tax according to IRS Publication 15-T, based on each employee's Form W-4. Texas employers must ensure federal income tax withholding is correct even without any state equivalent.

Payroll tax deadlines in Texas

TWC quarterly filing deadlines

Liable employers must file quarterly wage reports and make quarterly tax payments. Reports and payments are due by the last day of the month following the end of the calendar quarter.

If a due date falls on a weekend or legal holiday, the deadline moves to the next business day.

IRS federal payroll tax deadlines

For a complete 2026 compliance calendar covering all federal and state obligations, see our payroll compliance checklist.

How to file and pay payroll taxes in Texas

Filing Texas SUI

All Texas employers must file wage reports electronically through the TWC's Unemployment Tax Services (UTS) portal. TWC requires all employers to pay their taxes electronically and offers several electronic methods to file quarterly reports.

Payment methods accepted by TWC include:

• ACH debit
• Credit card
• Mail payment (only for employers with an approved hardship waiver)

Employers can schedule payments up to the end of the current month and modify or cancel them before final processing.

Texas employers are required to report new hires to the Office of the Attorney General within 20 calendar days of an employee's first day of paid work.

Filing federal payroll taxes

Federal payroll taxes are deposited through the IRS Electronic Federal Tax Payment System (EFTPS). Deposit schedules (monthly or semi-weekly) depend on your total tax liability during the IRS lookback period.

If you have employees in more than one state, see our guide to managing multi-state payroll tax registration to understand registration, nexus, and jurisdiction rules across states.

Texas workers' compensation

Texas workers' compensation is unlike any other state. Understanding the rules here matters both for compliance and for managing employer liability.

Is workers' compensation required in Texas?

Texas remains the only state where private employers are not legally required to provide workers' compensation insurance.

Employers who do not subscribe ("non-subscribers") must file DWC Form-005 (Employer Notice of No Coverage) with TDI annually, between February 1 and April 30. Non-subscribers lose key legal defenses if an injured employee sues them for negligence.

Types of workers' compensation benefits in Texas

Employers who subscribe to the Texas workers' compensation system through TDI-DWC provide coverage under four income benefit types, plus medical and death benefits:

2026 workers' compensation benefit limits

The Texas DWC sets maximum and minimum weekly benefit amounts annually, based on the State Average Weekly Wage (SAWW). These rates run from October 1 to September 30. For the period October 1, 2025, through September 30, 2026:

• TIBs: Paid at 70% of the difference between the employee's average weekly wage and any post-injury earnings (75% for eligible lower-wage workers injured on or after September 1, 2015). The maximum TIBs rate for this period is $1,271 per week; the minimum is $191 per week
• IIBs: Paid at 70% of the employee's average weekly wage, limited to 70% of the SAWW
• TIBs can last up to 104 weeks. An extension is possible if spinal surgery is required within 12 weeks of the deadline

For the most current maximum and minimum weekly benefit figures, refer directly to the TDI SAWW page.

Optional coverage: Texas Income Protection Plan (TIPP)

Employees can elect to participate in the Texas Income Protection Plan (TIPP) through payroll deductions. This is separate from the workers' compensation system and is employee-funded.

If you're considering a broader HR compliance solution for your Texas workforce — including workers' comp management, benefits, and payroll — see our guide to using a PEO in Texas.

Penalties for late or incorrect filings

Texas employers face penalties and interest charges for late or incorrect payroll tax filings at both the state and federal levels:

• TWC penalties apply when employers miss quarterly wage report deadlines or underpay UI taxes. Interest accrues on unpaid balances
• IRS penalties for late federal payroll tax deposits start at 2% and increase based on how late the deposit is (5% after five days, 10% after 15 days, 15% if still unpaid more than 10 days after an IRS notice). Failing to file Form 941 on time carries a separate 5% per month penalty on unpaid tax

Non-subscribers to Texas workers' compensation who fail to file DWC Form-005 on time may face administrative penalties from TDI.

See how you can simplify Texas payroll with Deel

Deel Payroll handles the full payroll lifecycle for US employers—from calculation through filing and payment—on owned infrastructure built for compliance, not cobbled together from third-party processors.

Here's what Texas employers get with Deel Payroll today:

• Full federal and state tax filing: FICA, FUTA, Texas SUI, Form 941, Form 940, state withholding and unemployment returns, and local payroll taxes all filed and remitted in-house
• Multi-state payroll support: When employees move states mid-year, Deel Payroll files taxes according to the correct jurisdiction automatically
• Real-time payroll calculation: See the tax and pay impact of every change before approving the run
• Automated mid-cycle adjustments: Salary changes, new hires, and terminations are pro-rated automatically
• W-2 and W-3 generation: Bulk or individual, accessible by admins and employees in the platform
• Multiple pay frequencies: Bi-weekly, semi-monthly, and monthly supported; multiple payroll groups per entity
• Deduction and retirement plan management: Recurring deductions, 401(k) Traditional, 401(k) Roth, and Simple IRA all processed through payroll
• Compliance monitoring built in: Federal, state, and local regulation updates applied automatically; overtime rules enforced; I-9/E-Verify and background checks supported
• Leave and time tracking: Vacation, sick, and parental leave configured with hourly earnings calculations; clock-in/clock-out with geo-fence and mobile app support
• Integrations with your existing stack: Xero, QuickBooks Online, NetSuite, Workday, BambooHR, Okta, Carta, Checkr, and more via open API

Whether you prefer to manage payroll yourself or hand it to Deel's experts, the platform gives you the flexibility to operate the way your business works best.

Talk to a Deel payroll expert to see how it works in practice.