So is it really true that members of an LLC, taxed as a partnership, can actually deduct their state tax on their individual 1040?

[danielle-51]

So if you have paid $3000 in state quarterly tax estimates, the IRS allows you to deduct that $3000 you paid for state taxes from your federal tax return? Each member would individually deduct whatever he/she had paid in state taxes on their 1040's? None of us pays more than $10,000 in state tax, which I think I saw as the cap on it. Where exactly do you take this deduction on the 1040? It almost sounds too good to be true.

[Mike9241]

on schedule A which also means you must have enough in other itemized deductions to exceed your standard deduction

Standard deduction 2022

Married filing joint or qualifying surviving spouse $25,900

Single $12,950

Head of Household $19,400

Married filing separately $12,950

Additional age 65 or older or blind for each (not dependents) - double if both conditions are true (MFJ, QSS, MFS) $1,400

Additional age 65 or older or blind (not dependents) - double if both are true (Single, HOH)  $1,750  

[danielle-51]

Since we do not itemize deductions, but take the standard deduction, I guess we do not qualify...thank you! It has all been somewhat confusing....with the new legislation passed for those who want to file for PTE. I don't see how for us that would work without a lot of confusion. We are a small family business, and are trying to keep things simple. Those who started out as kids are now adults working in the business, and we are trying to keep things as simple as possible for everyone to manage their taxes on their own. I have had a lot of questions, and appreciate the answers I am finding here. It has been a great help.

[Critter-3]

I highly recommend you talk to a local tax professional in your state to get educated on any new tax laws that might affect your partnership in your state. Either that or go on your state's website to find out what's new for partnerships. Partnerships themselves are passed through entities and do not pay state taxes on the partnership return so I'm not sure what you thought was new about state income taxes paid by an individual who happens to be a partner. State estimated taxes or state  taxes paid during the tax year or for the tax year have always been an itemized deduction on the schedule a.

[danielle-51]

Yes, thank you. The "new" part is the option to file as an PTE entity for our state (Arkansas), where the partnership can elect to pay state tax for all members, becoming a deduction for the partnership on the 1065,  instead of the individual on  the 1040, if I am understanding things correctly.

[danielle-51]

So if you take the standard deduction, you do not get to deduct state tax, is that correct? It is only if you itemize deductions? We will be using TurboTax to file, so maybe that will help. TurboTax will know based on how you answer your questions. Right?

[PatriciaV · Accepted solution]

Yes. State Income Tax payments are only used on your return if you qualify to itemize, but not if you take the Standard Deduction. 

Enter all your information under Deductions, and TurboTax will help you determine if you qualify. @Mike9241 gave you the thresholds (Standard Deduction) for each filing status for comparison.

[danielle-51]

Thank you!

[fanfare]

see the K-1 for what you as a partner can deduct on your Form 1040 Individual income tax return.

@danielle-51 

[fanfare]

If you paid $12,000 in state income tax, you can't deduct it even if you itemize.

The "State and Local Tax" cap limits your deduction for all such items to $10,000.

That includes your property tax also.

@danielle-51