Governor Holcomb signed Indiana Senate Bill 2: Taxation of Pass-Through Entities
Senate Bill provides pass-through entities (PTEs) (s-corp and 1065 returns) an election to pay Indiana income tax at the entity level based in an individual owner’s share of income. The election creates a tax credit for the individuals/owner(s) which will offset the individual’s personal income tax liability. The savings opportunity is this can maximize your state deduction for federal purposes and reduce your taxable income since the deduction of taxes will be deductible from income.
- The individual rate of 3.25% applies and does not include county taxes
- Election must be mailed directly to the Department of Revenue. It is expected to be available for electronic filing in 2023.
- The year the taxes are paid (2023 for most) is when the deduction of paid state taxes will be deducted from the federal income.
- Election must be made between March 31, 2023, and August 31, 2024 due to the retroactive nature of this bill.