If you extended your Texas Franchise Tax Report earlier this year, the final deadline is coming up soon — Monday, November 17, 2025. That means you’re filing the 2025 Texas Franchise Tax Report, even though it covers financial activity from your 2023 or 2024 accounting year.
Understanding the Report Year vs. Accounting Period
Each Texas Franchise Tax Report is named for the year it’s due, not the year of the underlying financial data.
So while this return is called the 2025 Report, it’s based on your 2024 fiscal year federal income tax year or the fiscal period that ended bethe start of fore 2025 — the same accounting period used for your related federal return.
This mismatch between report year and accounting period is one of the most common points of confusion for taxpayers. If you’d like a detailed breakdown (including charts and examples), check out my earlier post:
👉 Texas Franchise Tax Report: Report Year and Accounting Period Explained
A Quick Reminder on the Compensation Deduction
For most taxable entities that don’t qualify for the EZ Computation, one of the key elements of the margin calculation is the Compensation Deduction. This deduction allows businesses to subtract certain payments to employees from total revenue when computing margin.
However, there are per-individual limits that apply — and for combined groups, this limit must be applied across the group as a whole, not separately per entity.
2025 Report Compensation Deduction Limit
For the 2025 Report (based on 2024 accounting data), the maximum compensation per individual that can be deducted is $450,000.
This cap includes all wages, salaries, and cash compensation, as well as benefits such as health care, retirement plan contributions, and workers’ compensation insurance.
Combined Group Application
If your business is part of a combined group, remember that this $450,000 limit applies per individual across the entire group, not per company.
💡 Example:
Jane Doe earns $300,000 from Company A and $200,000 from Company B, both within the same combined group.
The combined group can only deduct $450,000 total for Jane — not $500,000 — even though she’s paid by two different entities.
Don’t Forget the Filing Logistics
- Report Year: 2025 Texas Franchise Tax Report (based on 2024 data)
- Extended Due Date: Monday, November 17, 2025
- Who Must File: All entities that extended their May 15 filing deadline
- How to File: Electronically through Webfile
- Payments: Any additional tax owed must be paid by the deadline to avoid penalties and interest.
Final Thoughts
If your 2025 Texas Franchise Tax Report isn’t finalized yet, take a moment to confirm you’ve applied the $450,000 per-person limit correctly — especially if your business is part of a combined group. Misapplying that cap is a common audit adjustment, but an easy one to avoid with a quick review.
If you’d like help reviewing your Texas Franchise Tax Report before filing, reach out — there’s still time before Monday’s deadline.