What is california passthrough entity elective tax payment?
The California Pass-Through Entity (PTE) Elective Tax is a tax option available to certain pass-through entities, such as S corporations, partnerships, and LLCs treated as partnerships, in California. This elective tax was introduced as a response to the federal cap on state and local tax (SALT) deductions, which limits the amount individuals can deduct on their federal tax returns. Here's how it works: 1. **Eligibility**: The election is available to entities that are taxed as partnerships or S corporations. The entity must have consent from its partners, shareholders, or members who collectively hold more than 50% of the entity's shares or interests. 2. **Election**: The entity must make the election on an annual basis. Once made, the election is irrevocable for that tax year. 3. **Tax Rate**: The elective tax is calculated at a rate of 9.3% on the entity's qualified net income. 4. **Credit for Owners**: The owners of the pass-through entity can claim a credit on their California personal income tax returns for their share of the elective tax paid by the entity. This credit can help offset their California personal income tax liability. 5. **Purpose**: The main goal of this elective tax is to allow owners of pass-through entities to effectively bypass the federal SALT deduction cap by shifting the tax burden from the individual to the entity level, where it is fully deductible for federal tax purposes. 6. **Deadlines**
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