New York taxpayers generally do not greet new taxes with enthusiasm, but New York’s new pass-through entity tax (“PET”) is poised to provide some relief to rising personal tax rates—and an exception to this rule. After exploring ways to help individuals manage the federal $10,000 limitation on state and local tax deductions, New York has enacted a new, elective, entity-level tax on pass-through entities that has the potential to provide a federal tax deduction that more than offsets the cost of Personal Income Tax increases in the 2021-2022 State budget. This Legal Update discusses the mechanics of PET and how to take advantage of it.

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