NJ BAIT Deduction on Form 1040

[Mike7388]

I have PTE for which I made a NJ BAIT payment.  Where on my Federal Form 1040 do I insert the amount of my NJ BAIT payment to get credit for that business expense?  I've tried to insert  on my 1040 worksheet in section 2 - Adjustments to Income, line 24 z, but the program won't allow me to enter a value either in the description cell or the amount cell.  I'm using TurboTax Deluxe.  Please advise.

[DianeW777]

The credit seems to be a state income tax payment made by the entity and then passed over to the individuals as a credit towards their tax liability.  It is used to offset the tax on the individual return. The credit may not reduce the tax liability below the statutory minimum tax. Excess credits may be carried forward for twenty years. 

• NJ BAIT Information
• Corporation Minimum Tax Rates

You can enter the amount you are able to utilize for the credit amount and you could enter it as follows:

1. Enter your K1 in the federal return under S-corps, Partnerships, and Trusts > K-1
2. Once you begin your state return, you will come to the screen 'Schedule NJ-K-1 Received?' answer 'Yes'
3. Continue through the NJ K-1 screens until you each 'Pass-Through Business Alternative Income Credit' entry
4. Enter your BAIT amount from your K-1.
5. See the images below.

[Mike7388]

Diane,  Thank you for your reply.  However, my understanding is that the NJ BAIT payment is deductible as a business expense of the PTE  (in my case, an S-Corp).  However, it is not reported on the 1120-S schedule K-1.  Hence, I need to record it as an expense on my 1040 to offset the income reported on the K-1.  The purpose of this NJ state approved program is to avoid the $10,000 limit on state and local tax payments by an individual.  Hence, by deducting it as a business expense, I avoid that limitation.  So, it needs to be reported as an expense on my Federal return to offset the K-1 income.  I thought I would record it as described in my original question, but can't seem to input values on that schedule.  Any idea why that would be?

BTW, I have no issue reporting it on my NJ return.  That's correct.  Its the deduction described above which is the only issue.

[DianeW777]

It depends. If you enter the tax as a deduction on  your itemized deductions under 'Other taxes' then it is not limited.  It looks like you can add this if you are using the TurboTax CD/Download version by using the Forms mode, using the Tax & Int Wks. There doesn't seem to be an entry in the Step-by-Step section.

@Mike7388

[Mike7388]

Thank you.  That works from a mechanical point of view.  But is that the correct way to reflect it? Does it not need to be reflected as an adjustment to the K-1 income for which it is related?  Thanks again.

[DianeW777]

This acts as an adjustment to the K-1 income if you can itemize your deductions.  It will not be a direct entry in the K-1 section of the federal return.

The reason for the deduction is because it is a tax deduction that is not limited by the $10,000 for state and local taxes (SALT).

[Mike7388]

Thank you.

[1430]

The NJ - Pass-Through Business Alternative Income Credit form does not open when I add the NJ-K-1 information to my state return.   Can not determine what I am missing on the input side??

[ksrzrr]

How can line 6 in schedule A be filled out in the step-by-step version of TurboTax?

[HopeS]

The credit seems to be a state income tax payment made by the entity and then passed over to the individuals as a credit towards their tax liability.  It is used to offset the tax on the individual return. The credit may not reduce the tax liability below the statutory minimum tax. Excess credits may be carried forward for twenty years. 

• NJ BAIT Information
• Corporation Minimum Tax Rates

You can enter the amount you are able to utilize for the credit amount and you could enter it as follows:

1. Enter your K1 in the federal return under S-corps, Partnerships, and Trusts > K-1
2. Once you begin your state return, you will come to the screen 'Schedule NJ-K-1 Received?' answer 'Yes'
3. Continue through the NJ K-1 screens until you each 'Pass-Through Business Alternative Income Credit' entry
4. Enter your BAIT amount from your K-1.
5. See the images below.

See the link below for additional information:

NJ Bait

@ksrzrr