Jan 25, 2023
The Tax Cuts and Jobs Act (TCJA), P.L. 115-97, imposed a $10,000 limitation on individual taxpayers for the deduction of state and local taxes (SALT) for tax years 2018 through 2025. In response, many states enacted laws allowing (or mandating) passthrough entities (PTEs) to pay the taxes at the entity level instead.
In November of 2020, the IRS issued Notice 2020-75, which clarified that partnerships and S corporations may deduct their SALT payments at the entity level in computing nonseparately stated taxable income or loss. The notice also indicated that the IRS intends to issue proposed regulations to this effect.
While electing a PTE tax election can be very beneficial overall, certain aftereffects — while small alone — when stacked together, may reach a materiality level where it should be second-guessed.
On this Tax Section Odyssey episode, David Kirk, CPA, CFP, LLM, Private Tax Leader, National Tax — EY, discusses with April Walker, CPA, CGMA, Lead Manager — Tax Practice & Ethics, AICPA & CIMA, several concerns that could lead to reconsideration of making a PTE election.
What you’ll learn in this episode
Related resources
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