Article
3 min read
Your Ultimate Guide to Texas Payroll
US payroll
Author
Jemima Owen-Jones
Published
August 07, 2023
Last Update
February 03, 2025
Key takeaways
- Any businesses that hire employees in the state of Texas must contribute to the state’s Unemployment Tax Program.
- Texas employers do not need to withhold any personal income tax.
- Texas does not require employers to have workers’ compensation or state disability insurance, although it is still a common practice among employers to minimize liability.
Employers must navigate various regulations and requirements to ensure proper payroll withholding in each US state. This guide explains what employers need to pay and withhold from payroll in Texas, including unemployment insurance, personal income tax, and workers’ compensation.
Paying unemployment insurance
On top of federal taxes such as Medicare and Social Security taxes, employers are responsible for managing certain Texas state taxes as part of payroll.
Unemployment Insurance Tax is a national program administered by the US Department of Labor that provides temporary financial relief to people who are unemployed through no fault of their own. You can pay and report on your UI through the Texas Workforce Commission’s online portal.
The UI tax in Texas can be split into five separate rates:
| Name | Rate | Method |
|---|---|---|
| General Tax Rate | Variable starting at 0% | The number of claims made against your business divided by your total taxable wages over the past three years multiplied by the replenishment ratio of 1.22% |
| Replenishment Tax Rate | 0.15% | Fixed fee to replenish the fund for benefits not charged to a specific business |
| Obligation Assessment Rate | 0% | When set by the state, it’s the sum of the bond obligation assessment rate and the interest rate |
| Deficit Tax Rate | 0% | Based on the amount the state needs to cover insufficient funds |
| Employment and Training Investment Assessment (ETIA) | 0.1% | Fixed fee to credit the ETIA fund |
The minimum tax rate for employers in 2025 is 0.25%, and the maximum tax rate is 6.25%. These rates apply to the first $9,000 that each employee earns during the calendar year. This structure ensures that the tax burden is shared and supports the state's unemployment insurance program.
For more information on paying your unemployment insurance, refer to the Texas Workforce Commission.
Withholding personal income tax from your Texas employee
Texas does not have any personal income tax. Therefore, employers do not have to withhold any personal income tax after hiring their first employee in the state.
Payroll tax deadlines in Texas
Employers in Texas must adhere to the following schedule for submitting quarterly wage reports and tax payments:
| Quarter | Period | Due Date |
|---|---|---|
| Q1 | Jan-Mar | Due by April 30 |
| Q2 | Apr-Jun | Due by July 31 |
| Q3 | Jul-Sep | Due by October 31 |
| Q4 | Oct-Dec | Due by January 31 |
Note: If due dates fall on a weekend or legal holiday, the deadline extends to the next business day.
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Submission process for payroll taxes
Employers must follow certain requirements to manage taxes via the Unemployment Tax Services Portal:
- Payment Methods: Employers must pay via ACH debit or credit card. Those with hardship waivers may opt to mail their payments
- Online Management: Employers must register and create an account on UTS to file or adjust wage reports and manage tax payments. Payments can be scheduled up to the end of the current month and can be modified or canceled before final processing
Paying your Texas workers’ compensation
Texas does not require employers to have workers’ compensation or state disability insurance after hiring their first employee in the state. However, many companies in Texas still purchase workers’ compensation or disability insurance to minimize liability.
Moreover, employees can opt to purchase a Texas Income Protection Plan (TIPP) using withholdings from their payroll.
If you opt into the state workers’ compensation, Texas regulates the minimum and maximum amount you can spend on the following types of employee benefits:
- Temporary Income Benefits (TIBs): Replaces wages temporarily following an accident or injury
- Impairment Income Benefits (IIBs): Covers employees with permanent impairments when they return to work
- Supplemental Income Benefits (SIBs): Supports wages for employees who are unable to earn the full amount
- Lifetime Income Benefits (LIBs): Cover permanent payments for severe, life-changing medical issues
- Medical costs: Assists with treatment for the injury or illness
- Burial benefits: Pays for funeral costs
- Death benefits: Helps families replace lost income due to a work-related death
Continuous Compliance™
FAQs
Are there any penalties for late payment of payroll taxes in Texas?
Yes, employers who fail to pay their payroll taxes on time may face penalties and interest charges. It is important to adhere to the submission deadlines to avoid these additional costs.
What happens if a payroll tax deadline falls on a weekend or holiday?
If a payroll tax deadline falls on a weekend or legal holiday, the due date is extended to the next business day.
How is the Employment and Training Investment Assessment (ETIA) used?
The ETIA, assessed at 0.10% of wages, funds employment and training programs in Texas, aiming to enhance the skills and employability of the workforce.
What is the maximum benefit amount for workers' compensation in Texas?
The maximum benefit amount for workers' compensation depends on the type of benefit. For example, TIBS is capped at $1,219 per employee in 2025.
What are the workers' compensation benefits in Texas?
Workers' compensation in Texas includes income benefits, medical benefits, burial benefits, and death benefits. Income benefits are split into four categories based on the reason for the benefit and how long it lasts.
Simplify US payroll tax compliance with Deel
While this guide provides essential information on Texas payroll taxes, payroll compliance, and state requirements extend beyond what is covered above. To streamline the process and ensure full compliance, companies can turn to Deel.
Deel offers a comprehensive solution for managing US and international payroll, including payments, taxes, worker classification, and more. Speak with an expert today to see how you can streamline your US payroll processes and ensure compliance with state regulations.
Disclaimer: This article is provided for general informational purposes and should not be treated as legal or tax advice. Consult a professional before proceeding.
About the author
Jemima is a nomadic writer, journalist, and digital marketer with a decade of experience crafting compelling B2B content for a global audience. She is a strong advocate for equal opportunities and is dedicated to shaping the future of work. At Deel, she specializes in thought-leadership content covering global mobility, cross-border compliance, and workplace culture topics.
