Pass-Through Entity
A business entity that does not pay federal income tax at the entity level; instead, profits and losses pass through to owners who report them on their individual returns.
Detailed Explanation
Pass-through entities include S corporations, partnerships, sole proprietorships, and most LLCs. Owners of qualifying pass-throughs may also benefit from the Section 199A Qualified Business Income (QBI) deduction of up to 20%. State-level Pass-Through Entity Tax (PTET) elections are available in many states as a workaround to the SALT deduction cap, allowing the entity to deduct state taxes federally and provide owners a credit on the state return.
Related TS CPA Service
Expert and tailored business tax services, because your business deserves more than a generic filing.
Learn about Business Tax PreparationRelated Terms
S Corporation
A pass-through tax election under Subchapter S of the Internal Revenue Code that avoids corporate double taxation while allowing shareholder-employees to reduce self-employment tax.
Partnership
A business entity owned by two or more persons who share in profits and losses, taxed as a pass-through with each partner reporting their share on their individual return.
Section 199A QBI Deduction
A federal deduction of up to 20% of Qualified Business Income for owners of pass-through entities and sole proprietorships.
Pass-Through Entity Tax (PTET) Election
A state-level tax elected at the entity level to allow pass-through owners to circumvent the federal SALT deduction cap.
Have a Question About Pass-Through Entity?
Get a free, no-obligation answer from a licensed CPA. We respond the same day.
Get Your Free Quote