Pass-through entity taxes – How law firms can manage the SALT deduction limit

Description

Abstract: Many high-income taxpayers were upset when the Tax Cuts and Jobs Act of 2017 imposed a $10,000 limit on the federal income tax deduction for state and local taxes (SALT). In response, at least two dozen states and New York City have implemented pass-through entity taxes (PTETs) that provide a workaround for those eligible. This article looks at what such taxes mean for law firm partners, members and shareholders. A short sidebar delves into the difference in the laws of a couple of states.