Top 10 Texas Tax Credits Guide – Texas offers no state income tax, but residents and businesses can still unlock significant tax savings through targeted Texas tax credits and relief programs. Whether you’re a homeowner seeking property tax relief or a business claiming franchise tax credits, this 2026 guide highlights the top 10 options based on official sources from the Texas Comptroller of Public Accounts and state legislation.
These incentives target innovation, historic preservation, affordable housing, energy, child care, and property tax reductions. Many franchise tax credits are permanent or enhanced in 2026, while property tax exemptions deliver major relief amid rising values. Always verify eligibility with the latest forms and consult a tax professional, as rules can depend on your specific situation.
1. Research and Development (R&D) Franchise Tax Credit
Businesses investing in innovation receive one of Texas’s most valuable Texas tax credits. Effective January 1, 2026, the new Subchapter T R&D credit replaces the prior system and is now permanent with higher rates.
Key details:
- Credit equals 8.722% of qualified research expenses (incremental over a three-year base); rises to 10.903% for research partnered with Texas public or private higher education institutions.
- Refundable for small businesses (revenue ≤ no-tax-due threshold of ~$2.47M), those owing <$1,000 in franchise tax, or qualifying veteran-owned startups.
- Qualified expenses align with federal IRC Section 41 (as of Dec. 31, 2011) for research conducted in Texas.
- Claim on your franchise tax report using Form 05-182 (R&D Activities Credit Schedule) and related schedules; carryforward up to 20 years.
Businesses previously claiming the sales tax exemption can no longer do so after 2025—this credit consolidates incentives for long-term planning.
2. Historic Structure Rehabilitation Tax Credit
Preserve Texas history while reducing your franchise tax liability. This credit supports rehabilitation of certified historic structures.
Key details:
- Generally 25% of qualified rehabilitation expenditures.
- Available to owners or lessees of certified historic structures.
- 5-year carryforward; no expiration on establishing the credit.
- Register via Texas Historical Commission and claim on franchise tax report with Form 05-180.
Ideal for developers, property owners, and businesses restoring older buildings in Texas.
3. Clean Energy Projects Franchise Tax Credit
Texas supports large-scale clean energy with this limited but powerful credit for qualifying projects.
Key details:
- Up to the lesser of $100 million or 10% of total capital costs.
- Limited to three projects statewide; available starting Sept. 1, 2018.
- 20-year carryforward; assignable under certain conditions.
- Applies to projects defined under Natural Resources Code §120.001(2), after any Chapter 313 agreements expire.
Perfect for renewable energy developers contributing to Texas’s energy leadership.
4. Housing Development Credit
Support affordable housing and earn a franchise tax break through this targeted incentive.
Key details:
- Credit for qualified housing developments (often tied to low-income housing tax credits or similar programs).
- 10-year carryforward with 3-year carryback option.
- No new credits or carryforwards claimable on reports due after Dec. 31, 2035.
- Claim via specific supplement forms on the franchise tax report.
Developers and investors in multifamily or affordable housing projects benefit most.
5. Child Care Franchise Tax Credit
Help working families and employees by claiming credits for day-care related expenditures.
Key details:
- Covers qualified day-care expenditures under Tax Code Chapter 171, Subchapter N (including on-site centers or contributions).
- Percentage-based on net operating costs (e.g., 30-35% in some proposals for certified Texas Rising Star programs) or construction costs in the first year.
- Limits apply based on franchise tax due (e.g., $100K–$500K caps in recent legislative examples).
- Schedule E (Form 05-151) for qualified expenditures.
Businesses providing or supporting employee child care gain a competitive edge while lowering taxes.
6. Strong Families Credit (New in Recent Legislation)
This newer franchise tax credit encourages contributions to family support organizations.
Key details:
- For taxable entities contributing to eligible organizations certified by OneStar Foundation (focused on at-risk families, parenting programs, etc.).
- Credit limited to the lesser of the contribution amount or $1 million.
- Claimed under Subchapter P on franchise tax reports.
A fresh option for businesses supporting community family services.
7. Residence Homestead Property Tax Exemption
One of the largest Texas tax relief programs for homeowners—often delivering thousands in annual savings.
Key details (2026 updates):
- Mandatory $140,000 exemption from school district taxes for all qualifying residence homesteads.
- Additional local option exemptions (up to 20% of appraised value, minimum $5,000) available in many areas.
- File Form 50-114 with your county appraisal district; applies to your primary residence.
Recent voter-approved increases make this a top savings tool for Texas families.
8. Over-65 or Disabled Property Tax Exemption
Extra relief for seniors and individuals with disabilities on top of the homestead exemption.
Key details (2026 updates):
- Additional $60,000 school district exemption for homeowners age 65+ or disabled.
- Local options often add more (minimum $3,000).
- Surviving spouses may qualify in some cases.
Combined with the general homestead, this can eliminate or drastically cut school taxes for many.
9. Disabled Veteran Property Tax Exemption
Honoring service members with substantial property tax relief.
Key details:
- Partial or total exemption based on disability rating (up to 100% for total disability).
- Surviving spouses and children may continue eligibility.
- Apply with Form 50-135 or 50-114 to your appraisal district.
A meaningful benefit for veterans and their families across Texas.
10. Freeport (Goods-in-Transit) Property Tax Exemption
Businesses moving goods through Texas enjoy this inventory tax break.
Key details:
- Exempts goods, wares, merchandise, and certain aircraft parts detained in Texas for 175 days or less (up to 730 days for some aircraft parts) for assembly, storage, manufacturing, etc.
- Local communities must adopt the exemption; also ties into Goods-in-Transit incentives.
- File Form 50-113 or equivalent with the appraisal district.
Manufacturers, distributors, and logistics companies save significantly on ad valorem taxes.
Final Tips for Claiming Texas Tax Credits in 2026
- Businesses: File accurate franchise tax reports (due May 15 or Nov. 15) with the Texas Comptroller. Use Webfile or approved software and attach required schedules.
- Homeowners: Apply for property tax exemptions by the April 30 deadline (or later with good cause) through your local appraisal district.
- Track carryforwards and combine credits where allowed (most cannot exceed 50% of tax due in some cases).
- Recent 2025-2026 changes (e.g., enhanced R&D, higher homestead amounts) stem from legislation like SB 2206 and voter propositions—double-check official Comptroller resources for your filing year.
Texas continues to lead with pro-business and family-friendly tax policies. For the latest forms, rules, and calculators, visit the official Texas Comptroller of Public Accounts website (comptroller.texas.gov) or consult a qualified CPA or tax advisor. Savings vary by situation, but these top 10 Texas tax credits and relief programs can make a real difference in 2026 and beyond.