As we approach the 2025 report year, Texas S-Corporations should be aware of several key updates to the state’s franchise tax laws. These changes may impact your filing obligations and tax calculations.
Franchise Tax Rates and Thresholds
For 2025, the Texas franchise tax rates and thresholds are as follows:
- No Tax Due Threshold: $2.47 million in annualized total revenue. S-Corporations with revenue at or below this amount are not required to file a franchise tax report but must submit either a Public Information Report (Form 05-102) or an Ownership Information Report (Form 05-167).
- Tax Rates:
- Retail or Wholesale: 0.375%
- Other than Retail or Wholesale: 0.75%
- Compensation Deduction Limit: The maximum compensation deduction is $450,000 per person, up from $400,000 in prior years.
- EZ Computation Threshold: Entities with total revenue at or below $20 million may qualify to use the EZ Computation method, simplifying the tax calculation process.
Filing Deadlines and Extensions
For calendar-year S-Corporations, the franchise tax report is due by May 15, 2025. If this date falls on a weekend or holiday, the due date will be the next business day. S-Corporations can request an extension by submitting Form 7004, granting an automatic six-month extension until November 15, 2025. Note that this extension applies to filing only; any taxes owed are due by May 15.
Reporting Requirements
Even if your S-Corporation qualifies for the “no tax due” status, you must still file a Public Information Report or an Ownership Information Report. These reports provide essential details about your business and ownership structure.
Planning Ahead
Review your financial projections for 2025 to determine if your S-Corporation will meet the “no tax due” threshold. If your revenue exceeds this amount, consulting with a tax professional can help clarify your filing obligations and potential tax liabilities.
