The New PTET Tax Deduction for Business Owners

NewsroomBusiness OwnerTax Strategies
Written By gbfadmin

Above is our video about the PTET (pass-through entity tax) deduction which allows business owners to get around the $10,000 SALT cap that was put in place back in 2017.  The PTET allows the business entity to pay the state tax liability on behalf of the business owner and then take a deduction for that expense. This special tax deduction can save a business owner thousands of dollars in taxes. Currently, 31 states, including New York, have some form of PTET program.  In this video, Dave Wojeski & Michael Ruger will cover:

  •  How the PTET deduction works?

  • Which type of entities are eligible for the PTET deduction

  • Deadlines for electing into the PTET program

  • How the estimated tax payments are calculated and the deadlines for remitting them

  • Changes to the PTET S-corp rules in 2022

  • The new NYC PTET program available in 2023

  • The challenges faced by companies that have multiple owners that are residents of different states

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

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Frequently Asked Questions (FAQs):

What is the Pass-Through Entity Tax (PTET) deduction?
The PTET deduction allows certain business entities to pay state income taxes at the entity level rather than the individual level. This structure helps owners bypass the $10,000 federal cap on state and local tax (SALT) deductions introduced in 2017.

How does the PTET deduction help business owners save on taxes?
By allowing the business entity to pay state taxes directly, the PTET converts what would have been a non-deductible personal expense into a deductible business expense. This can result in significant federal tax savings for eligible owners.

Which types of business entities qualify for the PTET deduction?
Eligible entities typically include pass-through structures such as S corporations, partnerships, and LLCs taxed as partnerships. Sole proprietorships and C corporations are not eligible for the PTET election.

What are the deadlines for electing into the PTET program?
Election deadlines vary by state, but most require entities to opt in annually by a specific date—often tied to the tax filing or estimated payment deadlines. Missing the election deadline usually means waiting until the next tax year to participate.

How are PTET estimated tax payments calculated and when are they due?
Estimated PTET payments are generally based on each owner’s share of income allocated to the state and are due in quarterly installments. Payment schedules vary by state, so it’s important to verify deadlines with each jurisdiction’s tax authority.

What changes were made to the PTET rules for S corporations in 2022?
In 2022, several states, including New York, clarified and expanded PTET rules for S corporations, simplifying how these entities calculate and allocate tax payments among shareholders. These updates aimed to ensure consistent treatment with partnerships.

What should businesses know about the new NYC PTET program introduced in 2023?
New York City launched its own PTET program in 2023, allowing city residents who own eligible pass-through entities to take advantage of an additional deduction at the local level. The program operates separately from the state PTET and requires a separate election.

Additional Disclosure: Wojeski & Company, American Portfolios and Greenbush Financial Group LLC are unaffiliated entities. Neither APFS nor its Representatives provide tax, legal or accounting advice. Please consult your own tax, legal or accounting professional before making any decisions.

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