Indiana Pass-Through Entity Tax (PTET)

The Indiana Pass-Through Entity Tax (PTET) rate is 3.15%. This rate applies to the entity’s adjusted gross income (AGI) apportioned to Indiana. A pass-through entity (PTE) that does business in Indiana may voluntarily elect to tax its income at the entity level based on each owner’s share of adjusted gross income. The election is available to all PTEs, including those taxed as partnerships, S corporations, and limited liability corporations that are taxed as a partnership or a subchapter S subsidiary. It is not available to single-member LLCs that are disregarded for federal purposes or to C corporations. This election is particularly beneficial to those companies with nonresident owners that would otherwise be subject to the $10,000 limitation on the deduction for state and local taxes on their individual 1040 returns. However, there are several important considerations to consider when considering this workaround.

One major concern is that the state’s PTET election does not provide credit for PTET paid to other states, which creates a potential double taxation issue. To address this issue, the new law enacted by SEA 2 allows Indiana resident owners of electing PTEs to claim a credit on their individual tax returns for the amount of the PTET they pay to other states that have a PTET. This provision is effective for tax years beginning after 2022.

How to Pay Indiana Pass-through Entity Tax?

There are two main payment methods for the Indiana Pass-Through Entity Tax (PTET):

Electronic Payment through INTIME: You can pay through the INTIME online portal at https://www.in.gov/dor/online-services/intime-tax-center/.

Paper Payment with Form IT-6WTH: This option involves mailing a completed Form IT-6WTH with your payment.

You can download and print the form from the official website: https://www.in.gov/dor/tax-professionals/nonresident-withholding-faq/.

Indiana Pass-through Entity Tax Due Dates

If you own a business in Indiana, You can either file a business return or make quarterly estimated payments through INTIME. If you make estimated payments, you should always include a voucher. The deadline for paying the PTE is the last day of your fiscal year.

Indiana Pass-through Entity Tax Exemption

Currently, there are no specific exemptions from the Indiana Pass-through Entity Tax (PTET) based solely on the type of entity or industry. While there are no specific exemptions based on entity type or industry, there are ongoing discussions and potential legislation proposing changes to the PTET, including potential exemptions for certain industries or businesses. It’s recommended to stay updated on any developments related to the PTET through the Indiana Department of Revenue website or consulting with a tax professional.