Texas payroll setup, unemployment tax, new hire, and payday rules for 2026.
Texas does not have state income tax withholding, but employers still need to handle TWC unemployment tax, quarterly wage reports, new hire reporting, payday rules, written deduction authorization, and final pay timing.
No Texas withholding
Texas does not require state income tax withholding from employee wages.
$9,000
Texas unemployment tax applies to the first $9,000 paid to each employee during the calendar year.
0.32% to 6.32%
TWC lists the 2026 minimum and maximum unemployment tax rates as 0.32% and 6.32%.
2.70%
TWC lists the 2026 entry-level rate as 2.70% for all groups with no exceptions.
Texas payroll taxes at a glance
| Topic | Texas rule for 2026 | Payroll action |
|---|---|---|
| State income tax withholding | No Texas personal income tax withholding. | Do not create a Texas withholding account for employee income tax. Federal withholding still applies. |
| State unemployment tax | TWC unemployment tax is employer-paid and is not deducted from employee wages. | Register when liable, assign the correct rate, and accrue/pay SUI on taxable wages. |
| Taxable wage base | First $9,000 per employee, per calendar year. | Stop Texas SUI accrual after each employee reaches the annual state wage base. |
| 2026 rate range | 0.32% minimum to 6.32% maximum. | Use the employer’s TWC rate notice, not an average rate, for production payroll. |
| 2026 new employer rate | 2.70% entry-level rate for all groups with no exceptions. | Use the assigned TWC rate until TWC issues a different rate. |
| Quarterly reports | Reports and payments are due by the last day of the month following the end of the calendar quarter. | File wage reports and pay unemployment tax electronically unless TWC grants a hardship waiver. |
Employer registration with TWC
Texas Workforce Commission says liable employers should register for a TWC unemployment tax account within 10 days of becoming liable. TWC describes liable employer responsibilities as registering the account, reporting new hires, filing wage reports, and paying unemployment taxes on time.
- Determine whether the employer is liable for Texas unemployment tax.
- Register online through TWC’s unemployment tax registration process.
- Save the TWC account number and rate notice in the payroll system.
- Set the Texas SUI wage base to $9,000 per employee for 2026.
- Set report/payment due dates for April 30, July 31, October 31, and January 31.
Quarterly wage reports and tax payments
Texas employers report wages when paid, not when earned or accrued. TWC says employers report gross wages each quarter and pay unemployment tax on the first $9,000 paid to an employee during the calendar year.
| Wages paid in | Quarter ends | Report and payment due |
|---|---|---|
| January, February, March | March 31 | April 30 |
| April, May, June | June 30 | July 31 |
| July, August, September | September 30 | October 31 |
| October, November, December | December 31 | January 31 |
New hire reporting
Texas new hire reporting is administered by the Office of the Attorney General. Employers must report newly hired and rehired employees within 20 calendar days from the date the employee starts earning wages. Quarterly wage reporting is not a substitute for new hire reporting.
Pay frequency, final wages, and deductions
Texas Payday Law requires employers to pay employees in full, on time, and on scheduled paydays. TWC guidance says FLSA-exempt employees must be paid at least once a month, while other employees must be paid at least twice a month.
| Payroll item | Texas rule | Why it matters |
|---|---|---|
| Pay frequency | FLSA-exempt employees at least monthly; other employees at least twice monthly. | Payroll calendars should satisfy the state frequency rule before the first payroll run. |
| Employee quits | Final wages are due by the next regular payday. | Payroll can generally leave the worker on the next scheduled cycle. |
| Employee is discharged | Final wages are due within six calendar days. | Termination processing needs an accelerated final pay workflow. |
| Deductions | Payroll deductions generally need a court order, state/federal authorization, or written employee authorization for a lawful purpose. | Do not withhold wages for property, loans, or offsets without reviewing authorization and state limits. |
Texas is simple in one way and easy to miss in another.
No state income tax withholding makes Texas feel easy, but payroll still needs state-specific setup. The usual misses are TWC liability timing, SUI wage-base setup, new hire reporting, written deduction authorization, and final pay timing for discharged employees.
Texas payroll setup checklist
- Confirm federal EIN, federal withholding, FICA, and FUTA setup.
- Determine Texas unemployment tax liability.
- Register with TWC within 10 days of becoming liable.
- Enter the employer’s TWC account number, tax rate, and $9,000 wage base.
- Set quarterly TWC wage report and payment due dates.
- Set new hire reporting due within 20 calendar days.
- Confirm pay frequency, payday notices, and final pay workflow.
- Review written deduction authorization language before taking payroll deductions.
Texas payroll FAQ
Does Texas have state income tax withholding?
No. Texas does not have state personal income tax withholding for wages. Employers still need federal payroll tax setup and may need Texas unemployment tax setup.
What is the Texas SUI wage base for 2026?
TWC lists the taxable wage base as $9,000 per employee for 2026.
What is the Texas unemployment tax rate for 2026?
TWC lists the 2026 minimum rate as 0.32% and the maximum rate as 6.32%. The 2026 entry-level new employer rate is 2.70% for all groups with no exceptions.
When are Texas quarterly wage reports due?
Quarterly wage reports and tax payments are due by the last day of the month following the end of each calendar quarter: April 30, July 31, October 31, and January 31.
When are final wages due in Texas?
If the employee quits, final wages are due by the next regular payday. If the employee is discharged, final wages are due within six calendar days.
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