Act quickly to save tax dollars thanks to new legislation.
New Jersey recently enacted the Pass-Through Business Alternative Income Tax Act (NJ BAIT) in an effort to work around the $10,000 federal cap on individuals’ itemized deductions for state income taxes.
For the 2020 tax year, pass-through entities may elect to pay an entity-level income tax based on the sum of each member’s share of distributive proceeds. The member gets a tax benefit through a deduction against their distributive share of income for federal tax purposes and can also claim a refundable credit on their personal New Jersey income tax return for their pro rata share of the tax paid.
The election is available to partnerships, S corporations, and LLCs with at least two members. The election must be made annually by the original due date of the pass-through entity’s tax return. Once the election has been made, the pass-through entity must electronically pay quarterly estimated tax payments.
In order to benefit from this deduction on your 2020 tax return, you may be required to make a payment at the entity level by the end of the tax year, December 31, 2020.
If you wish to take advantage of this new election, contact an Alloy Silverstein tax advisor to help determine if this is applicable to you.
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