Last month the IRS issued Notice 2020-75 which allows pass-through businesses to deduct taxes that were previously picked up by shareholders or members.
Due to the $10,000 state and local tax (SALT) limitation on itemized deductions, many individuals who previously deducted state taxes incurred as a result of a flow-through business are no longer able to take those deductions. The IRS is now allowing pass-through businesses to deduct state taxes at the business level in states that have entity-level taxes for pass-through businesses.
Certain tax jurisdictions have enacted new laws that tax the flow-through businesses directly rather than passing the income through to the recipient. These states are currently as follows:
If you have a pass through entity that files tax returns in one of the above seven states, make sure to have a discussion with your tax preparer about whether you would be better off paying tax at the business level.
Contact us with any questions and remember to follow us on LinkedIn to stay up to date on all of our posts.
Certain tax jurisdictions have enacted new laws that tax the flow-through businesses directly rather than passing the income through to the recipient. These states are currently as follows:
- Connecticut
- Louisiana
- Maryland
- New Jersey
- Oklahoma
- Rhode Island
- Wisconsin
If you have a pass through entity that files tax returns in one of the above seven states, make sure to have a discussion with your tax preparer about whether you would be better off paying tax at the business level.
Contact us with any questions and remember to follow us on LinkedIn to stay up to date on all of our posts.
