If your business runs as a pass-through entity and your state charges a Pass-Through Entity Tax (PTET), you’ll need to file Form IT-655 when opting into the tax for 2026. Hit that filing deadline of March 15, 2026—unless you file for an extension.
What's Happening
Pass-through entities let profits and losses flow straight to owners, skipping federal corporate income tax.
Owners then report this income on their personal tax returns. By 2026, 35 states plus D.C. have rolled out some form of PTET to help business owners work around the federal SALT deduction limits that kicked in back in 2018 IRS.
How to Elect and File the PTET for Tax Year 2026
Start by confirming your business qualifies, then follow your state’s specific steps to elect and pay the tax.
- Confirm Eligibility: Make sure your business fits the pass-through mold—think partnerships, LLCs taxed as partnerships, or S corps. C corps and LLCs that elected corporate taxation? They’re out.
- Check State-Specific Rules: Pop over to your state’s Department of Revenue site (for example, New York or California) to double-check PTET eligibility, deadlines, and tax rates. A few states demand an annual re-election, so don’t assume last year’s approval carries over.
- Run the Numbers: Grab your state’s worksheet or tax calculator to figure out the PTET bill. This usually hinges on the entity’s income apportioned to the state and taxed at the top individual rate—New York, for instance, was at 10.9% in 2026 New York Department of Taxation.
- File the Election: Send in the state’s specific election form before the cutoff (New York uses Form IT-655). The deadline typically lands before the entity’s tax return due date.
- Pay Up: Get that PTET payment in by the due date—March 15, 2026, for calendar-year entities. A few states let you spread the cost with installments.
- Send Out K-1s: Hand owners their Schedule K-1s, showing their share of the PTET paid. They’ll then claim a credit on their personal state returns for their slice of the PTET.
If This Didn’t Work
State rules vary—double-check your state’s quirks, deadlines, and deadlines before throwing in the towel.
- Verify State-Specific Rules: Some states add their own twists. California, for example, slaps an annual franchise tax on LLCs and partnerships that’s separate from the PTET California FTB. Look for extra forms or adjustments.
- Review Deadlines: Miss the election deadline—often tied to the original due date of the entity’s return—and you’re usually out of luck for that tax year. Call your state’s tax agency to see if late elections ever fly.
- Bring in a Pro: When the math gets hairy (say, you operate in multiple states), a CPA or tax attorney can untangle apportionment rules and keep you compliant.
How to Dodge PTET Filing Headaches Next Year
Keep your records tight, set reminders, and stay on top of rule changes to avoid PTET pitfalls.
- Update Business Records: Keep income, apportionment factors, and owner allocations squeaky clean. That way, your numbers stay accurate and audits go smoothly.
- Set Calendar Reminders: Jot down election and payment deadlines in your tax calendar. Most states want PTET elections by the original due date of the entity’s return—March 15 for partnerships and S corps Multistate Tax Commission.
- Watch for Law Changes: States tweak PTET rules all the time. Sign up for updates from your state’s Department of Revenue or a tax advisory service so you’re never caught off guard.
- Automate with Accounting Software: Tools like QuickBooks or Xero can track income and apportionment for you. Pair them with tax prep software (TurboTax Business, for instance) and PTET filings become way less of a chore.
Want the nitty-gritty on your state’s PTET rules? Check your state’s Department of Revenue site or flip through IRS Publication 541.
