Spec notes
- Under Local Government Code 229.902, added by HB 2464 in 2025, a city may not prohibit or require a permit for a no-impact home-based business.
- A no-impact home business stays within occupancy limits, generates no on-street parking or substantial traffic, is not visible from the street and does not substantially increase noise.
- The law does not stop a homeowners’ association from enforcing its own rules or deed restrictions.
Plenty of Austin companies start at a kitchen table or in a spare bedroom. Until recently, Texas cities set their own rules for home occupations. In 2025 the Legislature passed House Bill 2464, which added section 229.902 to the Local Government Code and limits what a city can do. The City of Austin says it is aligning its regulations with the law. Here is what changed and what still applies.
What counts as a home-based business
The law defines a home-based business as one operated from a residential property by the owner or tenant of the property, for manufacturing, providing or selling a lawful good or providing a lawful service. The City of Austin uses the same description on its small business permitting page.
The “no-impact” test
The strongest protection goes to a no-impact home-based business. Under the statute, that is one that:
- never has more employees and clients or patrons on the property at one time than the city’s occupancy limit for the dwelling;
- does not generate on-street parking or a substantial increase in traffic;
- operates so that none of its activities are visible from a street; and
- does not substantially increase noise or violate a noise ordinance.
What Austin can’t do
For a no-impact home-based business, a city may not prohibit its operation or require the operator or property owner to obtain a license, permit or other approval to operate it. For any home-based business, a city may not require rezoning the property for nonresidential use, or a fire sprinkler system if the home is a single-family detached house or a multifamily building with no more than two units.
What still applies
The law lets cities require that a home-based business comply with fire and building codes and with local rules on health and sanitation, traffic and parking, solid or hazardous waste, and pollution and noise. A city can require that the business be compatible with residential use and secondary to the home’s use as a dwelling. It can limit or prohibit home businesses that sell alcohol or illegal drugs, operate as a structured sober living home or are sexually oriented businesses. Austin also regulates short-term rentals separately.
Tip: Ask yourself the four no-impact questions before you invite clients over or hire help: Could neighbors see it from the street? Will cars park on the street? Will it be noisy? Will more people be there than the house allows?
Private rules still count
The law expressly does not stop homeowners’ associations, or other private agreements, from enforcing their own rules and deed restrictions. If you live in an HOA community, read the deed restrictions. If you rent, check whether your lease limits business use of the home.
The state and federal steps don’t change
Working from home does not exempt you from the basic setup:
- Pick a structure and, for an LLC or corporation, file with the Secretary of State; see Choosing a Business Structure in Texas: Sole Proprietorship, LLC or Corporation.
- File an assumed name certificate if you use a business name; sole proprietors in Austin file with the Travis County Clerk. See Assumed Names (DBAs) in Texas: When and Where to File.
- Get an EIN if you need one; see Getting an EIN for Your Austin Business: Free, Online and in the Right Order.
- Register for a sales tax permit if you sell taxable goods or services, including from home; see Texas Sales Tax Permits for New Businesses: Who Needs One and How It Works.
- File the yearly franchise tax report or information report if you form an entity.
Taxes on a home business
The IRS taxes a sole proprietor’s net earnings on the owner’s own return, and those earnings are generally subject to self-employment tax of 15.3 percent if they reach $400 or more. Keep business expenses and records separate from household ones from the start; it makes tax time and any later move to an office much easier.
When to move out
Growing past no-impact status, with regular client traffic, employees on site or visible activity, is a sign it may be time for commercial space. At that point, check the space’s certificate of occupancy and permits; see Austin Business Permits and Zoning: Opening a Storefront, Office or Studio.
When the rules took effect
HB 2464 passed the Texas House on May 14, 2025 and the Senate on May 25, 2025. The bill provided that it would take effect immediately with a two-thirds vote of each house, or otherwise on September 1, 2025. The City of Austin says it is updating its own regulations to align with the law, and its development staff can answer questions in a short residential appointment with the Development Process Team.
The bottom line
Since HB 2464, Austin cannot ban or require a permit for a home business that stays quiet, unseen, within occupancy limits and off the street. Health, safety and code rules still apply, and so do HOA rules and leases. Keep the impact low, handle the state and federal registrations and plan your move when the business outgrows the house.