If your Texas LLC hired its first employee in 2026, the Texas Workforce Commission (TWC) will assign you a new employer unemployment insurance (UI) tax rate of approximately 2.7% on each employee's taxable wages. You'll file and pay this quarterly — and missing a deadline means penalties and interest on your balance. This guide explains how the rate works, how it's calculated, and what to expect as your business grows.
Step 1: Understand what Texas UI tax is (and who owes it)
Texas UI tax — often called SUTA (State Unemployment Tax Act) — funds unemployment benefits for workers who lose their jobs. As a Texas employer, you pay UI tax entirely out of pocket. You cannot deduct it from employee paychecks.
Who owes Texas UI tax:
- Any Texas LLC with one or more W-2 employees on payroll
- LLCs that pay wages to part-time or seasonal employees
Who does NOT owe Texas UI tax:
- LLCs with only independent contractors (1099 workers)
- Single-member LLCs with no employees — owner distributions are not wages
Common mistake: Many new business owners assume UI tax only applies to larger businesses. In Texas, even one part-time employee triggers the obligation. Misclassifying employees as contractors does not eliminate the liability — it creates back-due taxes if the TWC audits your payroll.
Step 2: Know your new employer rate for 2026
The TWC assigns all new Texas employers a standard new employer rate of approximately 2.7% until your account has enough history for an experience-based rate. This rate applies to the taxable wages you pay each employee during the year.
What "taxable wages" means in practice:
- UI tax applies only to the first portion of each employee's annual wages, up to the taxable wage base set by the TWC each year
- Wages above that base in a given year are not subject to UI tax for that employee
- Check twc.texas.gov for the current taxable wage base — it can change year to year
Example calculation (illustrative only): If the taxable wage base is $9,000 and you pay one employee $40,000 per year, your UI tax applies only to the first $9,000. At 2.7%, that's $243 per employee per year — paid in quarterly installments. You are responsible for verifying the current wage base with the TWC.
Important: Texas has no state income tax, so there is no state income tax withholding from employee paychecks. UI tax is the primary state employer tax obligation.
Step 3: Understand how your rate will change over time
The 2.7% new employer rate is temporary. After the TWC has sufficient claims data — typically after one to three years — your rate shifts to an experience rating calculated based on:
- How much UI tax you have paid into the system
- How many of your former employees filed successful unemployment claims
- The balance of your employer account over time
A business with low employee turnover and few unemployment claims will see its rate drop below 2.7% over time. High turnover or frequent layoffs can push the rate above 2.7%.
When your rate changes: The TWC recalculates experience-rated employer rates annually. You will receive a rate notice from the TWC each December showing your rate for the coming calendar year. Your new employer rate automatically converts to an experience rate once you qualify — you do not need to apply.
For a broader view of what Texas employer obligations look like as you grow, see the Texas unemployment insurance tax guide for LLCs.
Step 4: Register with the TWC and file quarterly
Before paying any UI tax, you must register your LLC as a Texas employer with the TWC. Do this as soon as you hire your first employee — not at the end of the quarter.
How to register:
- Go to twc.texas.gov and access the Employer Benefits Services portal
- Complete the employer registration — have your LLC's EIN and basic business information ready
- The TWC will assign you a tax account number for all future filings
Quarterly filing deadlines:
| Quarter | Wages Covered | Due Date |
|---|---|---|
| Q1 | January – March | April 30 |
| Q2 | April – June | July 31 |
| Q3 | July – September | October 31 |
| Q4 | October – December | January 31 |
Each quarter, file a wage report listing every employee, their Social Security number, and wages paid, along with your UI tax payment. Both are due on the same date.
Estimated time: 15–20 minutes per quarter once payroll records are organized.
Step 5: Coordinate with your FUTA obligation
Texas UI tax is separate from the federal unemployment tax (FUTA) you owe to the IRS via Form 940. Most employers owe both. However, employers who pay state UI taxes on time can claim a credit of up to 5.4% against the 6% FUTA rate — reducing the effective federal rate to as low as 0.6% on the same wages.
This means paying your Texas UI tax on time has a direct impact on your federal tax bill. Late or missing state UI payments reduce or eliminate the FUTA credit.
For a complete picture of all Texas LLC compliance obligations, see the Texas LLC compliance checklist.
Quick reference
| Detail | Info |
|---|---|
| What | Texas state unemployment insurance (SUTA) tax |
| Who | All Texas LLCs with W-2 employees |
| New employer rate (2026) | ~2.7% (standard; confirm with TWC) |
| Tax basis | Each employee's wages up to annual taxable wage base |
| When | Quarterly — April 30, July 31, October 31, January 31 |
| Where | Texas Workforce Commission — twc.texas.gov |
| Penalty | Interest and penalties on unpaid balances per TWC schedule |
| Rate changes | Recalculated annually; rate notice mailed each December |
FAQ
What is the Texas UI tax rate for new employers in 2026?
New employers in Texas are typically assigned a rate of approximately 2.7% for 2026. This is the standard new employer rate assigned before the TWC has enough claims history to calculate an experience-based rate. The TWC can adjust this rate, so verify the current rate for your account at twc.texas.gov after you register.
What wages are subject to Texas UI tax?
Texas UI tax applies only to taxable wages — the first portion of each employee's earnings up to the taxable wage base set by the TWC each year. Once an employee's wages exceed that base for the calendar year, you stop paying UI tax on their additional wages until January 1. The TWC publishes the current taxable wage base on its website.
How is the Texas UI tax rate different from FUTA?
Texas UI tax (SUTA) is a state obligation paid to the Texas Workforce Commission. FUTA is a separate federal unemployment tax paid to the IRS via Form 940. Most employers can claim a credit against FUTA for state UI taxes paid on time, which significantly reduces the effective federal rate. Late state payments reduce this credit — so paying Texas UI on time also lowers your federal bill.
When does my Texas UI tax rate change from the new employer rate?
The TWC recalculates your rate annually based on your experience rating — your account's history of claims and contributions. After one to three years as a Texas employer, you'll receive a rate notice each December showing your rate for the coming year. A clean claims history can lower your rate below 2.7%.
What happens if I don't pay Texas UI tax?
Failure to pay UI tax results in interest and penalties added to your outstanding balance. The TWC can audit your payroll records, assess back taxes for wages that were not reported, and refer seriously delinquent accounts for collection action. Non-payment does not automatically forfeit your LLC's good standing — but the accumulated liability can become a serious financial problem.
Not sure what else your Texas LLC owes?
Most business owners are surprised by how many filing obligations they have. Ortholo's free compliance checker shows you everything you owe, when it's due, and what happens if you miss it — personalized to your entity.
Last verified: 2026-05-04
Sources: Texas Workforce Commission