The purpose of the PTE tax election is to mitigate the impact of the Tax Cuts and Jobs Act’s SALT deduction “cap” of $10,000 for individuals by providing a way to circumvent the SALT limitations. Eligible partnerships or New York S corporations may annually elect to pay on certain income for tax years beginning on or after January 1, 2021.
If an eligible partnership or eligible New York S corporation (electing entity) elects to pay the PTET, its partners, members, or shareholders subject to tax under Article 22 (personal income tax) may be eligible for a PTET credit on their New York State income tax returns.
Who can make the election
The following types of businesses are not eligible to opt in:
- single-member LLCs
- sole proprietorships
- non-profit corporations
- corporations that are not New York S corporations
When to make the election
The PTET election is available for tax years beginning on or after January 1, 2021. An entity may opt in to the PTET on behalf of an eligible partnership or S corporation for the 2021 taxable year no later than October 15, 2021.
Example: A partnership’s fiscal year is November 1, 2020, through October 31, 2021. The partnership is ineligible to make the election for the 2021 PTET taxable year because the partnership's fiscal year began prior to January 1, 2021.
For tax years beginning on or after January 1, 2022, the eligible entity may opt in on or after January 1 but no later than March 15. The election to opt in to the PTET must be made online on an annual basis and is irrevocable.
For more information regarding the NYS Pass-through Entity Tax click here, or contact your accountant.