Texas is one of the easier states to set up and run a trade business. There is no state income tax, and no statewide contractor license for most building work, so your taxes and your paperwork are lighter than in a lot of places. The rules that still bite are the ones that run on a clock: mechanic's liens, permits, and sales tax on the wrong kind of job.
Each section below points to a tool that runs your exact numbers for Texas.
Tax in Texas
Texas has no state income tax, so the only income tax on your trade profit is federal. That means no state return, no state estimated payments, and no state tax to set aside. You still owe federal income tax and self-employment tax and still have to make quarterly federal estimated payments, so do not treat the state tax you are not paying as spare cash.
On sales tax in Texas, nonresidential repair and remodel work is taxable on both the labor and the materials, while new construction and residential repair carry no tax on your labor. How you write the contract matters too: a lump-sum price is treated as consumer, and a price that separates labor and materials is treated as retailer. Confirm it for your kind of job before you quote.
Work out what to hold back on the Tax Set-Aside Calculator, which runs the federal and self-employment numbers for Texas.
Getting paid: liens and retainage
A mechanic's lien is the tool that actually gets a Texas contractor paid, and Texas runs it on a notice-driven schedule rather than a simple countdown. Texas ties both notices and filing to the 15th of specific months, not to a simple day count. Work out your exact dates from Tex. Prop. Code §53.052 or with an attorney. Miss the window and you usually lose the lien entirely, so the dates matter.
Enforcing it has its own clock. 1 year from the last day the lien could be filed (Tex. Prop. Code 53.158(a)). A written agreement with the current owner, recorded before that year runs out, can extend it to 2 years from the date you filed the affidavit. Work out your dates on the Lien Deadline tool, and if they are close, get an attorney to confirm them against the statute (Tex. Prop. Code 53.052, 53.056, 53.158).
On money held back as retainage, this is our plain-English summary for Texas. NOT VERIFIED. No citation on this row at all: it is carried from the June 2026 spine reconciliation and has never been read against a Texas statute here. Texas is recorded as a flat 10% on private work and a tiered 10% or 5% on public, with no threshold, no basis and no section.
- Private work: 10%.
- Public work: Tiered: 10% or 5%.
- Release (unconfirmed): About 30 days after completion.
Check the Retainage Calculator before you sign a contract that holds back more.
There is no Texas retainage letter on this site, and the NOT VERIFIED line above is why. A letter that tells the party holding your money what to hand over only gets written over a row that has been read against the statute in full. The Texas forms below are a different thing: they are the statute's own waiver wording, reproduced, and do not rest on the retainage row.
Free Texas lien waiver forms
Texas sets out the wording of a lien waiver in its own statute. These are reproduced from it rather than reworded, because the wording is the part that carries the legal effect. What a signature costs you differs from state to state, and not every state makes a waiver that departs from the form unenforceable, so read the notes on the form itself before you sign one.
- Texas: Conditional Waiver and Release on Progress Payment, for when someone asks you to sign away a stage payment before the money has cleared
- Texas: Unconditional Waiver and Release on Progress Payment, for when the stage payment has cleared
- Texas: Conditional Waiver and Release on Final Payment, for when someone asks you to sign off the last payment before it has cleared
- Texas: Unconditional Waiver and Release on Final Payment, for when the final payment has cleared
Do you need a license in Texas?
Texas has no statewide general contractor license, so for most building work there is no state license to get. That is one of the things that makes Texas straightforward to start in. It does not mean no rules at all: the state still licenses specific trades like electrical and plumbing, and your city or county can require its own registration or permits, so always check locally before you take a job on.
Trade licenses for electrical, plumbing and HVAC are usually separate and often required even where a GC license is not. See what applies to your trade on the Contractor License Checker.
Building codes and permits
Texas has no single statewide building code, so the edition you build to and whether you need a permit depend on your city or county. Do not assume the town next door adopted the same code or the same amendments.
- Homes: none statewide; each city adopts its own, over a statutory floor of the 2012 IRC. The 2024 IRC applies only to windstorm-insurance eligibility in the coastal catastrophe area, since 1 April 2026
- Electrical: 2023, moving to 2026 on 1 September 2026, and genuinely mandatory statewide
- Energy: 2015 IRC chapter 11 for single-family / 2015 IECC for commercial and residential over three stories
- Plumbing: both the 2018 UPC and the 2018 IPC are adopted; your city chooses which it enforces
Texas does not run one edition across the whole job, and the energy code is where it splits: 2015 IRC chapter 11 for single-family / 2015 IECC for commercial and residential over three stories. That matters more than the number itself. If you work on houses, the residential edition is your book, and the single figure quoted in most adoption charts is the commercial one.
Texas centralizes only the electrical code. Everything else is adopted city by city over a statutory floor of the 2012 IRC, and counties generally cannot adopt a residential code at all, so outside city limits there may be no building code. The one thing that binds everywhere is the NEC, set by the licensing department, and it moves to the 2026 edition on 1 September 2026. Two traps. The 2024 IRC you may have read about is an insurance eligibility standard for the coastal catastrophe counties, in force since April 2026, not a general building code. And the energy requirement splits by building type at the same edition year: a single-family home follows chapter 11 of the 2015 IRC while anything commercial or over three stories follows the 2015 IECC, so the split is invisible unless you check which statute you are under.
Source: 16 TAC §73.100 and Texas Occupations Code ch. 1305 (electrical, TDLR); Texas Local Government Code §214.212 (the 2012 IRC floor); Texas Health and Safety Code §388.003 with 34 TAC §19.53 (energy, SECO); 22 TAC §367.2 under Texas Occupations Code §1301.255 (plumbing, TSBPE); 28 TAC §§5.4008 to 5.4603 (windstorm, TDI). Read against that source on 2026-08-25.
Check a specific job on the permit tool.
Pay and workers' comp
The minimum wage in Texas is the federal $7.25 an hour. That is the floor for anyone you put on the books, and it is worth confirming against the state labor department each year because several states step their rate mid-year. Check a rate on the minimum-wage tool.
On workers' comp, the rule that catches people out in Texas is who has to be covered. Workers' comp is fully elective in Texas: you can opt out entirely. If you do, you lose the injury-suit protection and an injured worker can sue you directly. Get a premium range for your trade on the Workers' Comp Estimator.
If a client will not pay
If a client will not pay, you can sue for up to $20,000 in Texas's Justice Court (Justice of the Peace). That covers most unpaid-invoice disputes for a small outfit; a bigger claim goes to regular civil court where you will probably want an attorney. Walk through whether filing is worth it on the Small Claims checker.
The clock runs the other way too: a client generally has 4 years to sue you over the work under a written contract in Texas, with an absolute cutoff 10 years after the job is substantially complete. Work out your exposure on the Warranty & Claim Deadline tool.
Common questions
Does Texas have a state income tax?
No. Texas has no state income tax, so the only income tax on your trade profit is federal. You still owe federal income tax and self-employment tax and still make quarterly federal estimated payments.
Do I need a contractor's license in Texas?
For most general building work, no. Texas has no statewide general contractor license. The state still licenses specific trades and your city or county may require its own registration, so check both.
What is the small claims limit in Texas?
You can sue for up to $20,000 in Texas's Justice Court (Justice of the Peace). The filing fee is typically $54 to $100. Larger claims go to regular civil court.
Do I have to carry workers' comp in Texas?
Workers' comp is fully elective in Texas: you can opt out entirely. If you do, you lose the injury-suit protection and an injured worker can sue you directly.
How long do I have to file a mechanic's lien in Texas?
Texas does not run a simple countdown. Texas ties both notices and filing to the 15th of specific months, not to a simple day count. Work the exact dates out on the Lien Deadline tool and confirm them against the statute before you rely on them.
Are there free Texas contract and payment forms?
Yes. This page links 4 lien waiver forms reproduced from the Texas statute rather than reworded. They are free, there is no sign-up, and you fill one in on screen and download it as a PDF or a Word file.
What is the minimum wage in Texas?
$7.25 an hour, the federal floor. Check a specific job on the minimum-wage tool.
The honest bit
These are the 2026 rules for Texas as they stood when this guide was written, and they change: legislatures move thresholds, deadlines and rates every year. Treat this as general guidance to point you in the right direction, not legal, tax or financial advice. Verify anything you rely on at the source (the IRS, the Texas tax and licensing agencies, and your local building department) or with a professional. Where Texas does something unusual, the detail is called out above rather than glossed over.
Related: Tax Set-Aside Calculator · Mechanic's Lien Deadline · Contractor License Checker · Small Claims checker · Working in Your State
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Sources
- Texas Constitution and Statutes · Mechanics lien notice, filing and enforcement deadlines in Texas: Tex. Prop. Code 53.052, 53.056, 53.158. Verified against this authority on 2026-08-15.
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