Michigan pass-through entity owners are catching a federal tax break this year, compliments of a bill signed this week by Governor Whitmer.
The bill, which passed state legislature with overwhelming bipartisan support, allows owners of limited liability corporations, S corporations and other pass-through entities with Michigan-sourced income to pay the state and local taxes (SALT) at the entity level instead of the individual level.
As a result of the bill, the new entity-level tax will help small businesses that elected to flow-through income to individual owners. Instead of the individual paying state income tax, the entity may pay this alternative tax – creating a workaround to avoid the federal $10,000 limit on individual SALT deductions. It is applicable for businesses starting with the 2021 tax year.
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