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Nebraska Pass-Through Entity Tax (PTET)

Nebraska recently passed the Pass-Through Entity Tax (PTET) that allows pass-through entities (S Corporations & Partnerships) to make an election to pay the state tax due on the entity’s income at the entity level instead of the individual level.  This means that the entity pays the Nebraska tax instead of the partners. 

 

The benefit of paying the tax at the entity level is the state tax payment is deductible on the entity’s return, thus lowering your taxable income for the year.  Typically, there is no personal tax deduction on the state tax that is paid due to the $10,000 state and local taxes (SALT) cap the IRS put in place years ago.  This can be a great benefit for taxpayers. 

 

Entities will have to make an annual election that allows them to pay the state tax at the entity level and will likely have to pay estimated tax payments starting in 2024.  These estimated tax payments would be made at the entity level. 

 

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