How the Pass-Through Entity Tax (PTET) Can Save New York Partnerships & S-Corporations Thousands

What is the Pass-Through Entity Tax (PTET)?

If you own a Partnership or S Corporation in New York, you may be leaving significant tax savings. One often-overlooked strategy is the Pass-Through Entity Tax (PTET) — a powerful state tax election that can reduce your federal taxable income and lower your New York State tax liability.

Introduced as part of New York’s tax relief measures, PTET allows eligible businesses to pay state income tax at the entity level instead of the individual owner level. This simple shift can unlock federal deductions while still providing owners with a state tax credit.

Who Qualifies for the PTET in New York?

Not every business structure is eligible.
Eligible: Partnerships & S-Corporations
Not eligible: Sole proprietorships & C-Corporations

If your business qualifies, you can potentially take advantage of both federal and state tax benefits — but you must meet certain requirements.

How the PTET Works in New York

Here’s the step-by-step breakdown:

1. Entity-Level Tax Payment – Instead of the owner paying NY State taxes personally, the business pays it.
2. Federal Deduction – The business can deduct these state taxes on its federal return, reducing taxable income.
3. State Tax Credit – The owner receives a credit on their New York personal tax return, reducing their state tax bill.
4. Potential Savings – By combining the federal deduction with the state credit, owners can significantly lower their overall tax burden.

Important PTET Deadlines

Annual Opt-In Required – You must opt in to PTET every tax year.
Deadline: March 15 of the current tax year.

If you miss this deadline, you cannot elect PTET for that year — which means missing out on potential savings.

Example of PTET Savings

Let’s say your S-Corp has $500,000 in taxable income:

• Without PTET, you pay state tax on your personal return — but you lose the federal deduction due to the SALT cap.
• With PTET, the business pays the NY State tax, deducts it on the federal return, and you get a credit on your NY return — lowering both your federal and state taxes.

Why PTET is a Smart Strategy for NY Business Owners

The SALT (State and Local Tax) deduction cap introduced by the 2017 Tax Cuts and Jobs Act limits individuals to a $10,000 deduction for state and local taxes. PTET is New York’s way of helping business owners legally bypass this cap — without any complex restructuring.

Benefits include:

• Bigger federal tax deduction
• Lower personal taxable income
• No change in your business structure
• Simple annual election

Common Questions About PTET

1. Is PTET worth it for my business?
If your business has significant income, the savings can be substantial — but it depends on your specific tax situation.

2. Can my accountant handle the PTET election?
Yes. A CPA or tax professional can file the election and calculate the payment schedule for you.

3. Is PTET available in other states?
Yes, several states have similar workarounds — but the rules differ.

Next Steps: How to Opt In to PTET

1. Consult with your CPA or tax advisor to estimate your savings.
2. File the PTET election with New York State Department of Taxation and Finance before March 15.
3. Pay the estimated PTET throughout the year.

Don’t Miss Out on PTET Savings

If you own a Partnership or S-Corporation in New York, PTET could be one of the easiest ways to legally reduce your tax bill. The election is straightforward, but timing is everything — miss the deadline and you lose the benefit for the year.

Pro Tip: Review your business structure and income now to determine if PTET is right for you.Ready to explore PTET for your business? Contact our accounting firm today for a personalized tax savings analysis.