What is Pass-through entity tax (PTET)? 

New York State's Pass-through entity tax (PTET) for tax year 2026 is an optional tax that acts as a NYS tax credit to the shareholders or partners of the electing entity. The tax credit is intended to replace the need for the shareholders or partners to make estimated tax payments at the individual level and also acts as a federal tax deduction at the entity level! The tax is generally 6.85% of the entities net business income subject to income tax but is subject to increase if the entity’s taxable income exceeds $2,000,000. 

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What types of entities are eligible to opt-in to the NYS PTET program?
Currently, the only eligible entities include partnerships and S corporations that have gross taxable income in the state of New York. Ineligible entities include individuals, C-Corporations, trusts, estates, single-member LLCs and foreign corporations.

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Should my business opt-in?

While this question is subjective, RAC has advised our clients to make the election only if the eligible partnerships and S-corporation expects to show a net income after all depreciation and deductions of $75,000 or more. Keep in mind that the election also doesn’t make sense if the entity expects to have a net operating loss after depreciation and expenses.  Anything less than $75,000 and the cost of administering this election (i.e. RAC’s professional fees) will generally outweigh the benefits. See our example below.