Consultants in Texas: taxes and retirement for 2026
For independent consultants and fractional executives billing clients directly in Texas. Texas has no state income tax on wages or self-employment income. Here are the 2026 rules, a worked example and the official sources.
Texas rules for consultants
- State income tax (2026)
- Texas has no state income tax on wages or self-employment income. Texas has no personal income tax. Its constitution bans a tax on individuals' net income, including their share of partnership income (Art. VIII, Sec. 24-a), and a 2025 amendment also bans taxing individuals' capital gains (Sec. 24-b).
- Texas franchise (margin) tax
- Applies to LLCs, including a single-member LLC that files federally as a sole proprietor; a sole proprietorship with no liability protection is not covered. For 2026 and 2027 reports, an entity with total revenue at or below $2.65 million owes no tax and files only a Public Information Report or Ownership Information Report. Above that, rates are 0.75% (0.375% for retail and wholesale, or 0.331% with the EZ computation).
- Rideshare (TNC) driver independent contractor statute (Occupations Code 2402.114)
- A rideshare driver is an independent contractor for all purposes if the company does not set the hours the driver must be logged in, does not limit use of other rideshare apps or the driver's territory, does not restrict other work, and both sides agree in writing that the driver is a contractor. Enacted by H.B. 100 in 2017.
- TWC marketplace platform rule (40 TAC 815.134(b))
- Since April 29, 2019, a Texas Workforce Commission rule treats people who get work through a marketplace platform as not employed for state unemployment tax purposes if nine conditions are met. These include setting their own hours, being free to use other platforms, paying their own expenses and providing their own tools.
Federal rules for 2026
Solo 401(k) up to $72,000
A one-person consultancy can contribute a $24,500 employee deferral plus an employer share of about 20% of net self-employment earnings, up to $72,000 in 2026, plus an $8,000 catch-up at 50 or older ($11,250 at ages 60 to 63).
The S-corp trade-off
Electing S-corp status can cut payroll tax, but the salary you pay yourself also sets your Solo 401(k) room. Run both sides before you elect.
Quarterly estimated taxes
No one withholds tax from self-employment income, so you generally pay estimates four times a year if you expect to owe $1,000 or more. For 2026 income the federal dates are April 15, June 15 and September 15, 2026, and January 15, 2027. Paying 100% of last year's tax (110% if your AGI was over $150,000) in four equal installments avoids the underpayment penalty.
Self-employment tax
On top of income tax, self-employed people pay 15.3% on 92.35% of net profit: 12.4% Social Security up to the 2026 wage base of $184,500, plus 2.9% Medicare with no cap. Half of it is deductible.
A worked example
| Self-employment tax (sole proprietor) | $21,194 |
|---|---|
| Solo 401(k) maximum | $52,381 |
| SEP IRA maximum | $27,881 |
| Payroll tax saved as an S-corp on a $75,000 salary | $9,719 |
| Solo 401(k) maximum as that S-corp | $43,250 |
Federal figures only, before state and local taxes. Simplified: excludes the QBI deduction and the 0.9% Additional Medicare Tax. Computed from 2026 IRS limits (Notice 2025-67, Rev. Proc. 2025-32) and the SSA wage base.
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Questions
Do consultants in Texas pay state income tax?
Texas has no state income tax on wages or self-employment income. Texas has no personal income tax. Its constitution bans a tax on individuals' net income, including their share of partnership income (Art. VIII, Sec. 24-a), and a 2025 amendment also bans taxing individuals' capital gains (Sec. 24-b).
Are there other Texas taxes for self-employed consultants?
Texas franchise (margin) tax: Applies to LLCs, including a single-member LLC that files federally as a sole proprietor; a sole proprietorship with no liability protection is not covered. For 2026 and 2027 reports, an entity with total revenue at or below $2.65 million owes no tax and files only a Public Information Report or Ownership Information Report. Above that, rates are 0.75% (0.375% for retail and wholesale, or 0.331% with the EZ computation).
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Sources
- tlc.texas.gov/docs/legref/TxConst.pdf
- www.dol.gov/agencies/whd/state/minimum-wage/tipped
- comptroller.texas.gov/taxes/franchise/faq/taxable-entities.php
- capitol.texas.gov/tlodocs/85R/billtext/html/HB00100F.htm
- www.twc.texas.gov/sites/default/files/ogc/docs/fr-815-marketplace-04-19-twc.pdf
State and local facts researched from official sources and independently re-checked; last verified October 2026, next scheduled review 2027-01-02. Educational information for 2026, not tax, legal or investment advice. Rules change; check the official sources listed and a tax professional for your situation. Gigaverse AI, Inc. is a financial technology company, not a bank, and not itself a registered investment adviser or broker-dealer.