Bloomberg, SALT Workaround Used by Doctors, Lawyers Axed in GOP Tax Bill:
House Republicans’ bill to extend and expand Trump’s 2017 tax law would also raise revenue by cutting many professional service providers out of using state workarounds for the cap on state and local tax deductions.
Professional groups, including the American Institute of CPAs, are already asking for changes that would restore the value of pass-through entity tax regimes that became popular in 36 states and New York City after the 2017 law put a $10,000 limit on state and local tax payments that can be deducted from individuals’ federal returns.
These tax strategies give partnerships and S corporations the option to pay state and local taxes at the entity level, instead of having individual members pay as they normally would, and thus help the individuals avoid the SALT limit.
Melanie Lauridsen, vice president for tax policy at AICPA, said the House proposal, approved in a Ways and Means Committee vote Wednesday, was drafted to exclude businesses characterized as a “specified service trade or business” from using PTET workarounds to minimize their members’ federal tax obligations. This change in policy, if implemented, would boost taxes for millions of businesses providing accounting, legal, consulting, medical, and financial services, she said.
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