Wisconsin enacts a pass-through entity tax

Posted on Jan 14, 2019 by

 Act 368 Federal Deduction for State IncomeWisconsin Preserves Federal Deduction for State Income Tax

Election to be taxed at entity level—Beginning with 2018.

As the result of Act 368, Wisconsin law allows pass-through entities an election to be taxed at the entity level. This first applies to taxable years beginning on January 1, 2018, for S corporations. Other pass thru entities are eligible to make the election for the 2019 tax year.  Electing pass-through entities pay an entity level tax at the rate of 7.9% on net income reportable to Wisconsin. ( Sec. 71.365(4m), Wis. Stats.).  In effect, this allows for a deduction of state income tax where it would otherwise be disallowed under the provisions of the recently enacted Tax Cuts and Jobs Act limiting the deduction for state and local taxes to $10,000 on an individual’s tax return.