2 results for tag: Owner Exclusion
Defeat the $10,000 SALT Cap with the PTE Tax (Part 2)
As I explained in Part 1 last week, a majority of states now allow pass-through entity (PTE) owners to get around the federal $10,000 state and local tax (SALT) deduction cap on individual taxpayers by having their PTE pay state income tax on its income at the entity level.
Under this regime, the PTE deducts the state income tax as a federal business deduction, which is not subject to the $10,000 SALT cap.
The PTE owners get either a state tax credit for the tax payment or a reduction in their PTE income for state income tax purposes. Either way, they end up with a full (or near full) deduction on their federal income tax returns for the state ...
Defeat the $10,000 SALT Cap with the PTE Tax (Part 1)
Maybe the least popular change brought about by the Tax Cuts and Jobs Act (TCJA) was a first-ever cap on the federal personal income tax deduction for state and local taxes (SALT).
During 2018 through 2025, there is a $10,000 cap on deductions for the total of the following:
State income taxes, or general sales taxes if elected instead of income taxes,
State real property taxes, and
Personal property taxes.
Thus, for example, if you live in a high-tax state such as California or New York and owe $10,000 or more in property tax, that tax by itself will use up your $10,000 deduction. You’ll get no federal deduction at all for the ...