What is Utah's pass-through entity tax election?
Short answer: It lets an S corp or partnership pay Utah income tax at the entity level, which can work around the federal cap on state and local tax deductions.
Individuals can deduct only a limited amount of state and local taxes on their federal return. Utah lets S corporations and partnerships elect to pay Utah income tax at the entity level. The entity deducts that tax on its federal return, and the owners receive a Utah credit for the tax paid on their behalf.
Key points:
- The election is made on Utah Form TC-75 and must be made by the last day of the entity's tax year.
- Owners claim the credit on their Utah return using the amounts from their Utah K-1.
- It helps most when owners already hit the federal SALT cap through property taxes and other state taxes.
Whether it saves money depends on income, the current federal cap and each owner's situation. We model it before year end so the election can be made in time.
General information from Davis Schuler & Associates, LLC, not advice for your situation. Tax rules and thresholds change; confirm the current rules before acting.
Want an Enrolled Agent to look at your situation?
A short call with an Enrolled Agent. No cost, no obligation.