December 1, 2025

Acting Texas Comptroller Kelly Hancock Updates Franchise Tax Depreciation Rules to Align with Federal Provisions

(AUSTIN) — Acting Texas Comptroller Kelly Hancock today announced an update to the agency’s interpretation of Texas franchise tax depreciation rules, allowing Texas businesses to take advantage of bonus depreciation authorized by the federal One Big Beautiful Bill Act of 2025.

The decision follows a statutory review confirming that Texas franchise tax law provides the flexibility to apply the current internal revenue code (IRC) for depreciation calculations — rather than the outdated 2007 IRC, which required businesses to spread asset deductions over multiple years.

“Effective with the 2026 franchise tax report, Texas will align its franchise tax depreciation rules with the bonus depreciation provisions of the One Big Beautiful Bill,” Hancock said. “Texas should never be stuck in yesterday’s rules when federal law has moved forward. Our statute allows this modernization, and it’s the right call for taxpayers.”

Historically, the Comptroller’s office used the 2007 IRC for franchise tax depreciation. After a fresh legal review, the agency determined the depreciation provision in Texas law is not tied to 2007 and can reflect the IRC in effect for each tax year. This means that beginning with the 2026 franchise tax report, businesses may elect to deduct the full cost of qualifying fixed assets — such as machinery, equipment and furnishings — acquired after Jan. 19, 2025.

“This is a big win for Texas taxpayers,” Hancock said. “Not only does it deliver upfront tax relief, it also eliminates the burden of maintaining two different sets of books for federal and state taxes, slashing red tape for business operations in Texas.”

For additional guidance on Texas franchise tax requirements, visit the Comptroller’s website.