IRS Approves SALT Workaround for Pass-Through Entities

Before TCJA, individual taxpayers generally could deduct all state and local taxes (SALT) as itemized deductions. TCJA limited the individual SALT deduction to $10,000 for taxable years 2018 through 2025. Some states have been looking for a workaround to enable their resident taxpayers to avoid the $10,000 deduction limit. 

• IRS Has Approved a SALT Workaround for Pass-Through Entity (Notice 2020-75; IR-2020-252)
   
• Before TCJA, individual taxpayers normally could deduct all state and local taxes (SALT) as itemized deductions
   
• TCJA limited the individual SALT deduction to $10,000 for taxable years 2018 through 2025
   
• Some states have been looking for a workaround to enable their resident taxpayers to avoid the $10,000 deduction limit

• The IRS has approved the availability and functionality of this workaround in Notice 2020-75

Watch for legislation in your own state authorizing a PTE election for state taxes to be paid on behalf of the owner by the entity.

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Read more at: Tax Times blog