What is the logic behind some states not making a PTE payment refundable? I have a client that has losses from other investments so their state liability is low, yet they have one K1 that has quite a bit of income from that state and has PTE to cover the tax and receive the federal benefit of course, yet it is being held up most years since the state says it’s no refundable. Just seems odd? Anyone know?

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They get to keep the money

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Seems odd that states don’t want to give you more money?

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It’s a credit, not a payment on your behalf. There are a lot of credits that aren’t refundable. If you wanted the refundable option, make a composite payment. If you want the ability to side step federal tax laws, because that’s more valuable to you, go PTE. I actually see it as logical to not make it refundable, at least then there is an actual difference between PTE and composite.

Theoretically, PTEs creation should have been shot down in the first place. It’s just a way for business owners to get around tax laws that impact everyone else. With that said, it’s there so use it as a tool (I do it for myself and my clients all the time, I’m not anti-PTE, but it’s totally a tax avoidance scheme perpetrated by the states).

A lot of states did something that benefits them and the taxpayer when they made their PTE laws. Look at MA, they only give you 90% of your PTE payment as a tax credit. Making it nonrefundable is just a way to have the state say “taking the risk of federal lawsuit against us is worth it”.

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Yea agreed. At least being able to offset future liabilities is something. Just carry forward.

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