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Deductions & credits
It depends. The PTET credit applies to State Income tax, which means the payment may make a difference to a partner's state tax return. In essence, the partnership is paying the state tax on behalf of the partner, so they have a credit against their state tax liability.
On the federal side, the state tax is deductible only if the partner is eligible to itemize deductions. This is where the PTET may or may not make a difference on the partner's federal tax return.
Bottom line: if the income is insignificant, PTET may not be the best option. But if the state tax on that income would make a difference to the partner, then you may decide to have the partnership make the PTET payment.
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March 15, 2023
9:00 AM