|There is a new tax deduction available S-corporations and Partnerships to deduct for pass-through entity (PTE) withholding for its owners starting in 2022!
At KDP, we are focused on the legislative changes that affect your bottom line and committed to ensuring you are sustaining and improving your tax efficiency. In 2017, the Tax Cuts and Jobs Act of 2017 introduced a $10,000 limit on the amount of state and local taxes (SALT) an individual taxpayer can deduct for federal income tax purposes. This limitation undercut the consolation deduction at the federal income tax level which higher income taxpayers utilized to soften tax burden of income being double taxed by state governments—or triple taxed by local governments in some cases. Considering this negative impact, the IRS issued a notice on 11/10/2020 allowing a SALT deduction for PTE withholding payments made by S corporations and partnerships in calculation of taxable income.
In response to the allowance of the SALT deduction at the entity level, most states including Idaho, Oregon, and California passed legislation to allow elective PTE tax. Previously, PTE payments were only allowed for certain owners, which disqualified resident individual owners from making a payment. This created an enormous opportunity for everyday business owners to maximize their SALT deduction.
How to take advantage of the new legislation:
We are poised to help you get the most out of this deduction. Please contact us to begin the process.
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Your Team at KDP
Katie Laws, CPA, has 11 years of tax experience with areas of expertise including GL accounting, STAT accounting, GAAP investment accounting, CGAAP, and advanced spreadsheet analysis. She has led General Ledger management and calculation troubleshooting for accounting directors ($500 million – $150 billion AUM). She also served the Idaho State Tax Commission for 6 years as a Tax Auditor 3.