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New Pass-Through Entity (PTE) Payment Programs Aim To Address SALT Limitations

by Aaron Watkins, CPA | August 9, 2023

The Tax Cuts and Jobs Act (TCJA) of 2017 imposed a $10,000 limitation on the amount of state and local taxes (SALT) that taxpayers can deduct on their federal income taxes for the tax years 2018 - 2025. This has had a significant impact on taxpayers in states with high SALT burdens, such as California, New York, and New Jersey.

Due to these SALT limitations, many states have created pass-through entity (PTE) payment programs.

 These programs allow “pass through entities," such as partnerships and S corporations, to elect to pay state taxes on behalf of their owners. This allows the owners to deduct the state taxes paid on their federal income taxes, effectively bypassing the SALT limitation.

To take advantage of these PTE taxes, most states require elections by the entity, and several are rapidly approaching for the 2023 tax year. Most states have due dates in line with estimated quarterly tax payment deadlines. The only exception is California, whose residents received an extension of all tax payments until October 16, 2023. There are 36 states that enacted a PTE tax since TCJA deduction limitation.

We recommend reaching out to your CFO Advisor to see if you are eligible to make these payments. Here is the list of states that have PTE programs:

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