Could Your Organization Benefit by Electing Pass-Through Entity Taxation?

  • Real estate
  • 12/1/2021

Several states responded to the federal state and local tax deduction limit by allowing pass-through entities the option of calculating and paying tax at the entity ...

Several states responded to the federal state and local tax deduction limit by allowing pass-through entities the option of calculating and paying tax at the entity level. The IRS approved these elections as a legitimate workaround, which led to a multitude of states to enact pass-through entity tax elections.

Laws governing these entity-level tax elections vary significantly by state. Some of the state pass-through entity tax elections are mandatory, while others allow each owner to make the election separately. Some states allow residents a credit at the individual level for tax paid by the entity to another state, but others are silent on how the credit for taxes paid will work. In many states, the entity pays the tax at the same rate as individual taxpayers, yet other states have picked rates that are different.

The summary and analysis found here can help taxpayers determine whether a state’s election makes sense for them. Big thanks to our incredible SALT team for compiling this information!

This blog contains general information and does not constitute the rendering of legal, accounting, investment, tax, or other professional services. Consult with your advisors regarding the applicability of this content to your specific circumstances.

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