Pass Through Entity Tax Credits

The 2017 Tax Cuts and Jobs Act limited State and Local Tax (SALT) deductions to $10,000 when itemizing your taxes on Schedule A. This change caused considerable difficulties because for the first time in the United States our State and Local Tax payments were limited.

So far, over 30 states have passed laws to solve this problem. These laws allow the owner of an S-Corp or a Partnership to deduct the taxes they would normally pay at the individual level on the entity return. This process effectively by-passes the SALT limitation by deducting the taxes before they even get to the personal level.

An example would be if your K-1 is $300,000 and you’re required to pay a 5% state tax on that income, then the tax would be $15,000. After deducting the property taxes on your home and the state income tax on your W-2, normally this deduction would be lost given the limitation.

But with the Pass Through Entity Tax Credit, we can deduct that $15,000 at the entity level. If your combined federal and state income tax percentage is 35%, this would save you $5,250 annually. If your K-1 is larger than $300K, then your tax savings would be more.

There isn’t anything easy about this process. Our program includes the following:

Analysis

Quarterly computations looking at last year’s tax liabilities vs. the current year’s income. We compute any differences and add in a 10% cushion because it’s better to be over deposited than under. Any overage will be refunded when the returns are completed.

Preparation

We complete the paperwork necessary to make your quarterly state tax deposits at the entity level.

Follow Up

Customer Service and the time necessary to make sure your deposits are handled correctly are included in the fee.

The cost of the service is $500 per quarter with a minimum sign up commitment of one year.

Whatever your accounting and tax needs happen to be, we can help. Click on the Sign Up button below and fill out the attached form so that we can provide an Accounting Solution.