Texas Freelance Tax Calculator: What You Really Owe in TX

No state income tax is not the same as low tax

Texas is one of the few states that does not tax personal income, and freelancers moving here often hear that as “you keep everything.” You don't. The federal self-employment tax and federal income tax apply in full, and together they take roughly 18% of profit at $35,000 and 25% at $140,000.

What Texas does give you is simplicity. There is one tax return that matters, one set of quarterly estimates, and for most solo freelancers no state filings at all. The few Texas-specific items — franchise tax reports for LLCs and sales tax on certain digital services — are easy once you know they exist.

This guide walks the full bill in five steps, traces an Austin developer from $118,000 of revenue to a $22,760 bill, and shows the numbers at five profit levels. The figures are planning estimates, not filing advice.

How to calculate your Texas freelance tax in 5 steps

1. 01

   Start from net profit, not what clients paid

   Your Texas tax bill is worked out on profit. Take your gross receipts and subtract every legitimate business expense — software, equipment, a home office, a share of phone and internet, mileage, health premiums you pay yourself. A Texas freelancer with $118,000 of revenue and $18,000 of expenses is taxed on $100,000. Getting this number right is the single biggest lever on the whole bill.

2. 02

   Apply the 15.3% self-employment tax

   No state income tax does not mean no tax. Every US freelancer owes 15.3% self-employment tax on 92.35% of net profit — the Social Security and Medicare an employer would normally split with you. On $100,000 of profit that is $14,130, and in Texas it is usually the largest single line on your bill. Half of it is deductible against federal income tax.

3. 03

   Work out federal income tax after freelancer deductions

   Federal income tax applies to profit minus the deductible half of self-employment tax, the standard deduction ($15,000 for single filers in 2025) and the 20% qualified business income deduction. On $100,000 of profit that leaves roughly $62,000 of taxable income and a federal income tax bill of about $8,630 — much lower than people expect when they just multiply profit by 22%.

4. 04

   Check the Texas-specific items — then stop

   Texas has no personal income tax, so there is no state layer to add on a sole proprietor's profit. What you do need to check: the franchise (margin) tax if you run an LLC or corporation — no tax is due below the revenue threshold, roughly $2.47 million, but an annual information report is still required — and sales tax if you sell taxable items such as data processing services, which Texas taxes on 80% of the price.

5. 05

   Pay federal estimates four times a year

   Because nothing is withheld, the IRS expects quarterly estimated payments on April 15, June 15, September 15 and January 15. Texas has no state estimates to file, which makes the calendar simpler than in most states — but missing federal quarters still triggers an underpayment penalty, even if you pay everything in April.

A worked example: $100,000 of profit in Austin

A single filer, no LLC, standard deduction. Notice that the Texas line is zero — and the bill is still more than $22,000.

Texas freelance tax at five profit levels

Federal self-employment tax plus federal income tax for a single filer. Texas adds no state income tax. Estimates for planning — check IRS figures each January.

Eight signs your Texas tax plan has a gap

Most Texas tax surprises come from assuming the state's generosity reaches the federal bill too.

• !You think “no state income tax” means you barely owe anything
• !You set nothing aside because your old job withheld tax for you
• !You have never made a quarterly estimated payment
• !Your health premiums are not counted as a deductible cost
• !You formed an LLC and never filed a franchise tax report
• !You sell software or data services and never checked Texas sales tax
• !Your tax reserve sits in the same account as your spending money
• !You moved from California and kept the same rate — and the same reserve

Why self-employment tax is the big one in Texas

In a high-tax state, state income tax competes with self-employment tax for the top spot. In Texas, self-employment tax wins easily. On $100,000 of profit it is $14,130 — more than the federal income tax of about $8,630. Every freelancer pays it on every dollar of profit, starting with the first.

That is why reducing profit honestly, through legitimate expenses, matters so much here. Each $1,000 of deductible spending saves roughly $140 of self-employment tax plus $120 to $220 of income tax. Track mileage, your home office, software and health premiums carefully.

It is also why the S-corp question comes up earlier for Texas freelancers. Without a state tax or franchise tax eating into the savings, paying yourself a reasonable salary and taking the rest as distributions keeps more of the self-employment tax saving in your pocket.

The Texas rules worth five minutes of your time

Franchise tax: if you form an LLC or corporation, it is registered with the Comptroller and must file an annual Public Information Report. Below the no-tax-due threshold, roughly $2.47 million of revenue, no tax is owed. Missing the report can still lead to forfeiture of your entity's right to do business, so put the May 15 date in your calendar.

Sales tax: most freelance services are not taxable in Texas. Data processing and some information services are, on 80% of the charge. If you build or host software, sell templates or run subscriptions, read the Comptroller's guidance before your first invoice.

Local taxes: Texas cities do not tax income either. Your local costs show up as property tax, which is among the highest in the country — so budget for it in your living costs even though it is not on your tax return.

Turning the bill into a habit

The cleanest system is a separate tax account. Move 20% to 25% of every client payment into it the day it lands, then pay your four federal estimates from it. You will rarely need more, and in a good year you will have a small cushion left in April.

If your income jumps, use the safe harbour: pay 100% of last year's total tax across the four quarters (110% if last year's income was above $150,000) and you avoid penalties even if this year's bill is bigger. Settle the difference in April.

Finally, set your rate with the tax already inside it. A Texas rate does not need a state gross-up, but it absolutely needs the federal one — which is exactly what the Texas rate guide below walks through.

Frequently asked questions