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The Treasury Department and Internal Revenue Service (IRS) on November 9 announced that forthcoming regulations will clarify that state and local taxes imposed on and paid at the entity level by partnerships and S corporations will be fully deductible. While the Tax Cuts and Jobs Act limits state and local deductions to $10,000 for individual taxpayers who itemize, this limitation will not apply to state and local taxes paid by partnerships and S corporations at the entity level. Such entities will retain full deductibility of state and local taxes and can continue to pass-through income to partners and owners. The rules will be effective for partnership and S corporation taxable years ending after December 31, 2017.
For more information on this topic, please visit our Tax and Accounting Advocacy webpage.
