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Pass-Through Tax for SALT Cap in Maryland

Pass-Through Tax for SALT Cap in Maryland

Maryland has become the seventh state to give members of pass-through businesses the option of paying income taxes at their entity level, rather than on their personal income taxes. This is being suggested as a workaround to the 2017 tax law that capped individual federal deductions for state and local taxes at $10,000.  However, questions remain as to how the IRS will view this legislation and it is uncertain as to whether or not it will provide the relief intended.

This new measure becomes effective on July 1, 2020 and applies to the current tax year and all taxable years after December 31, 2019.

The new law includes measures:

  • Allowing entities the option to elect to pay tax with respect to resident members’ shares
  • Requiring pass-through entities to continue to pay tax on nonresident entity members’ shares
  • Establishing provisions for determining the applicable tax rate
  • Allowing for individuals and corporations to claim a tax credit equal to the tax paid by a pass-through entity on the member’s share of its taxable income

Please contact the BSSF team to discuss your specific case or if you have any questions about how this may impact your tax situation.

Disclaimer: This communication is intended to provide general information on legislative COVID-19 relief measures as of the date of this communication and may reference information from reputable sources. Although our Firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.

Posted In: Tax | Insights

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