What is an Entity-level tax deduction?
An entity-level tax deduction is the federal income tax deduction that S Corporations, Partnerships, and LLCs claim when they elect to pay state income taxes at the entity level rather than passing the obligation to individual owners. This deduction bypasses the individual SALT cap because the payment is treated as a business expense on the entity's federal return. The One Big Beautiful Bill Act preserves this deduction under Section 70120 and removes SSTB restrictions. A Late S Corporation election can help businesses qualify for this treatment.
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