New York · Pass-Through Entity Tax (PTET)
The SALT-cap workaround New York wrote into law — an entity-level tax with a personal credit.
PTET converts owners' nondeductible state income tax into a federally deductible entity-level tax. It is elective, annual, and time-sensitive — and New York City has its own parallel regime.
What is the New York PTET and why elect it?
An optional tax under Tax Law Article 24-A (§§860–866) that an eligible partnership or S corporation pays on its own income at graduated rates paralleling the personal schedule. Because the entity pays it, the tax is a federal business deduction not subject to the individual SALT cap; each owner then claims a New York personal credit under §606(kkk) for their share, plus their own-state resident credits where applicable.
How and when is the election made?
Commonly misreportedThe election is ANNUAL and IRREVOCABLE for the year once made, filed by the entity on the state's online portal by the statutory deadline early in the tax year (Tax Law §861 — in practice the March 15 date for calendar-year entities, with estimated payments then due quarterly). Missing the window means waiting for the next tax year; there is no late-election relief in the statute.
Is there a New York City version?
Yes — Article 24-B (§§867–873) creates a parallel NYC PTET for electing entities with city-resident owners, generating a corresponding city credit. An entity can elect state PTET, city PTET, or both; the analyses are separate.
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Related New York tax questions: New York City Income Tax · Federal Conformity & the OBBBA · Itemized Deduction Limits
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