On June 14, 2022, the Ohio governor signed into law a workaround for the $10,000 SALT deduction limitation imposed by the Tax Cut and Jobs Act of 2017.

Qualifying Pass Through Entities (PTE), including S corporations and partnerships, may elect to pay Ohio income taxes at the entity level beginning in 2022.  The election is irrevocable for the tax year the election is made.

The PTE entity level tax is fully deductible at the federal level, however the owner’s proportionate share of entity tax must be added back to their federal income to arrive at the owner’s share of Ohio taxable income.  If the owner’s share of the credit exceeds their Ohio tax liability, the owner will be refunded the unused credit on their individual Ohio tax return.  If the owner is a nonresident whose only source of income is from one or more electing PTE, the owner is not required to file an individual Ohio tax return.

For tax years beginning in 2022, the electing Pass Through Entity tax rate is 5%. For an electing PTE’s taxable year that begins in 2023 and in any subsequent year, the statutory rate equal to the tax rate imposed on taxable business income applies (currently 3%).

As more information is released, we will continue to update on our website or blog.

Polk & Associates

Large enough to serve a diverse clientele, yet small enough to maintain a hands-on approach, we are committed to maintaining the highest accounting and ethical standards with continuous education, extensive research resources, and excellent quality control.

Polk and Associates is a member of the Michigan Association of Certified Public Accountants, and the American Institute of Certified Public Accountants. The firm participates in the AICPA Peer Review Program, and has always received the highest level of award for its audit practice and quality control.