Could Your Organization Benefit by Electing Pass-Through Entity Taxation?
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!
- Carey M. Heyman, CPA
- Managing Principal of Industry - Real Estate
- CliftonLarsonAllen LLP
- Century City (Los Angeles)
Carey is the Managing Principal of the Real Estate Industry at CLA. He is a trusted advisor with close to 20 years of experience providing accounting, assurance, tax, and consulting services to real estate industry owners, operators, family offices, developers and syndicators. Carey has a strong track record of helping clients build and retain capital by leveraging tax- and cost-saving strategies and employing tax credits and incentives. He also consults with high net worth individuals, large family groups, and owners of closely-held businesses on all aspects of tax planning, estate planning, and retirement planning.
Comments are closed.