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IRS ALLOWS STATE AND LOCAL DEDUCTIONS FOR S CORPS AND PARTNERSHIPS

IRS ALLOWS STATE AND LOCAL DEDUCTIONS FOR S CORPS AND PARTNERSHIPS

In a taxpayer friendly move, the Department of Treasury and the Internal Revenue Service (IRS) announced that they would issue proposed regulations allowing S corporations and partnerships to deduct certain state and local income taxes (SALT). Specifically, taxes imposed on and paid by a partnership or S corporation would be allowed as a deduction by the partnership or S corporation. As such, these taxes would not be subject to limitations implemented under the Tax Cuts and Jobs Act (TCJA). Currently, these taxes are subject to a $10,000 limitation on deductibility on the personal tax returns of partnership or S corporation owners.

The IRS stated specified income tax payments made on or after November 9, 2020 would be eligible for the above benefit. Additionally, the proposed regulations will also permit taxpayers to apply these rules to payments made in a taxable year ending after December 31, 2017 and before November 9, 2020 as long as the payment was pursuant to a state law that was enacted prior to November 9, 2020.

 

 

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