Virginia Governor Signs Tax Relief For S-Corp Businesses

On April 11, Virginia Gov. Glenn Youngkin signed a bill that makes Virginia the 25th state to adopt the S-Corp Association’s SALT Parity reform policy. As a result, more than 200,000 Virginia S corporations and partnerships will have access to nearly $160 million in annual tax relief, starting with their 2021 returns.

As a reminder, the cap on state and local tax (SALT) deductions put into place by the 2017 federal tax reform law does not apply evenly to all businesses. C corporations may continue to deduct the full value of their SALT as a business expense while pass-through businesses like S corporations and partnerships may only deduct those taxes paid by the entity, not the business owner.

The Virginia law and others like it around the country restore the full deduction by allowing S corporations and partnerships to elect to pay their taxes at the entity level. If laws like these were enacted across the country, the S-Corp Association estimates that more than three million pass-through businesses would receive more than $6 billion in annual tax relief, all at no cost to states.

Read more here.