The R&D Tax Credit is back! Find out how the Big Beautiful Bill Act can fund your R&D. Learn More
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Short answer: Texas updated its previous R&D incentive structure in 2026 with a new, expanded franchise tax credit that eliminates the sales tax exemption and increases credit value, making planning simpler but more dependent on proper federal alignment.
Why it matters: Companies must now rely solely on the franchise tax credit and align closely with federal R&D filings, which changes how credits are calculated, documented, and claimed.
Who this applies to: CFOs, founders, and companies performing R&D in Texas, especially those previously using the sales tax exemption or older credit structure.
Starting January 1, 2026, Texas implemented a new Subchapter T R&D franchise tax credit, replacing the prior system. Key changes include:
Creating a more standardized system, but also removes flexibility companies previously had.
Before 2026, companies could choose between:
As of 2026, that choice is now gone.
This simplifies decision-making, but it also means companies need to maximize the credit itself rather than relying on upfront savings from equipment purchases.
The updated credit is more valuable than before.
Calculation is based on:
If no historical base exists, a simplified calculation may apply. One important limitation:
One of the most important updates is expanded access to refunds. Under the new rules:
This is particularly important for:
Texas is moving closer to making the credit usable across more business stages.
The new Texas credit is tightly tied to federal filings.
To claim the Texas credit:
This creates both opportunity and risk:
Qualified activities generally include:
The key requirement:
Previously, companies chose between an exemption or credit. Now it is time for credit optimization.
This shifts strategy toward:
You cannot treat Texas as a separate decision anymore.
New compliance requirements include:
Missing these steps can delay or eliminate benefits.
It does not. Planning needs to shift fully to the credit.
Without federal Form 6765, you cannot claim the Texas credit.
Only in-state research qualifies for the Texas credit.
The credit is now more valuable and more structured. Planning matters more than ever.
Updated as of April 2026
Texas is now positioning itself as a more competitive R&D state, but with stricter structure.
The Texas R&D credit is no longer a secondary incentive.
It is now a primary planning tool.
Companies that:
Will capture significantly more value. Those that rely on outdated assumptions could miss out.
If your company is performing R&D in Texas, the 2026 changes make it worth reviewing your strategy now.
TaxTaker helps companies align federal and state R&D credits, calculate qualified expenses, and structure claims under the new Texas rules so nothing is missed.
You can get a fast, expert assessment of your eligibility and potential savings, often within a day, so you know exactly how the updated Texas credit applies to your business.
Book a call to review your R&D credit strategy and see what opportunities may be available.
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Rachel Darrough is a Sr. R&D Manager with nearly 10 years of experience conducting federal and state R&D tax credit studies across various industry types, e.g., manufacturing, software, engineering, and construction. Rachel received a Bachelor's Degree in Managerial Finance and brings a strong technical foundation to evaluating qualified research activities, technical uncertainty, and experimentation under IRC §41. At Tax Taker, Rachel manages R&D engagements by collaborating with technical and finance teams to identify qualified expenditures, substantiate eligibility, and optimize credit outcomes. She applies an analytical approach to documentation and methodology while ensuring compliance with IRS guidance. Rachel is committed to helping clients leverage innovation-driven incentives to reduce tax liability and reinvest in continued R&D.
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