California Pass-through Entity (PTE) Elective Tax
For taxable years beginning on or after January 1, 2021, and before January 1, 2026, qualifying pass-through entities (PTEs) may annually elect to pay an entity level state tax on income. Qualified taxpayers receive a credit for their share of the entity level tax, reducing their California personal income tax. This will allow owners of pass-through entities to pay California personal income tax through that entity. The owner will receive a deduction for the California personal tax paid through the entity in the form of lower income reported to them on their K-1. This allows the owner to receive a
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