My wife and I are 2 members of a partnership, owning a rental property in VA, while we are residents of NY. I just finished filing the federal 1065 and issuing K1 to ourselves. In the past, we would file a partnership return with VA as informational only, without paying anything. Then we would file personal income tax return with VA and pay tax to VA. And the tax we paid to VA would be a credit on our NY personal income tax return.
This year, VA gave me an option to pay an elective tax for the partnership, so I did the VA 502PTET and elected to pay a PTET in April 2023. Now I am doing our personal federal return 1040 and I cannot figure out how the PTET credit should flow to us as members. There is nothing in the K1 that reflects the PTET paid to Virginia. I thought the idea of PTET is to circumvent the SALT cap, so it should show up on the 1040 somehow. Is my understanding correct? (PTET paid to VA will definitely count as credit on our NY return, but we would have gotten this credit anyway by paying tax to VA via our personal tax return.)
I filed 1065 first, then filed Virginia 502PTET. Was that a mistake? Should I have done the VA tax return for the partnership first, then filing the federal 1065? Is there a field in 1065 (and K1) that I should have made an entry for the VA PTET in order to show the tax credit paid to VA?
