Quick Answer
New York's PTET allows partnerships and LLCs to elect entity-level taxation at rates up to 10.9%, creating a federal business deduction that bypasses the $10,000 SALT cap. For high earners in the 32%+ federal bracket, this can save $2,000-$8,000+ annually compared to paying New York taxes individually.
Best Answer
Priya Sharma, CPA
Best for freelancers operating through partnerships or multi-member LLCs earning $100,000+
What is New York's PTET?
New York's Pass-Through Entity Tax (PTET) is an optional election that allows partnerships, LLCs, and S-corporations to pay New York State income tax at the entity level instead of having individual owners pay on their personal returns. This creates a federal business deduction that bypasses the $10,000 SALT (state and local tax) deduction cap.
How PTET works for freelancers
Entity-level payment: The LLC or partnership pays New York tax directly at rates matching individual rates (up to 10.9% for NYC residents)
Federal deduction: The entity deducts the PTET payment as a business expense on federal returns
Individual credit: Owners receive a credit on their personal New York returns for their share of the PTET paid
Example: $180,000 NYC-based consulting partnership
Two partners each earning $90,000 through their partnership:
Without PTET election:
With PTET election:
PTET rates and calculation
PTET rates mirror New York individual income tax rates:
New York State only:
NYC residents add city tax:
Eligibility requirements
Qualifying entities:
Election timing:
Key benefits for high-earning freelancers
SALT cap workaround: Convert capped personal deduction ($10,000) into unlimited business deduction
Federal tax savings: Particularly valuable for taxpayers in 24%+ brackets
Cash flow management: Entity-level payments can help with estimated tax planning
Simplification: One entity payment instead of individual estimated payments by each member
Important considerations
Minimum tax coordination: PTET doesn't eliminate New York's LLC filing fee ($25) or franchise tax minimums
Multi-state issues: Coordinate with other states to avoid double taxation on the same income
Credit limitations: PTET credits can only offset New York personal income tax, not other types of tax
Break-even analysis
PTET generally benefits freelancers when:
What you should do
1. Verify entity eligibility - Ensure you have a qualifying multi-member structure
2. Calculate potential savings - Use our quarterly estimator to model scenarios
3. Coordinate timing - Plan PTET payments with overall estimated tax strategy
4. Make the election - File by March 15th (or September 15th with extension)
5. Track credits - Ensure proper credit application on personal returns
Key takeaway: New York's PTET can save high-earning freelancers in multi-member entities $2,000-$8,000+ annually by converting capped SALT deductions into unlimited federal business deductions.
*Sources: [NY Tax Law Section 860-A](https://www.nysenate.gov/legislation/laws/TAX/860-A), [IRS Publication 535](https://www.irs.gov/pub/irs-pdf/p535.pdf)*
Key Takeaway: New York's PTET can save high-earning freelancers $2,000-$8,000+ annually by bypassing the federal SALT cap through entity-level tax payments.
Federal tax savings from NY PTET election by income level and tax bracket
| NY Income | PTET Tax | Federal Bracket | SALT Cap Benefit | PTET Benefit | Net Savings |
|---|---|---|---|---|---|
| $75,000 | $5,625 | 22% | $2,200 | $1,238 | $-962 |
| $125,000 | $10,500 | 24% | $2,400 | $2,520 | $120 |
| $200,000 | $17,640 | 32% | $3,200 | $5,645 | $2,445 |
| $300,000 | $27,570 | 35% | $3,500 | $9,650 | $6,150 |
More Perspectives
Priya Sharma, CPA
Best for established consultants weighing the pros and cons of various entity tax elections
Strategic considerations for PTET election
As an established consultant, you're likely evaluating PTET alongside other tax strategies. Here's how it fits into broader tax planning.
PTET vs. other elections
S-Corp election: Can combine with PTET for additional payroll tax savings
Retirement contributions: PTET savings can fund larger SEP-IRA or Solo 401(k) contributions
Income timing: Entity-level payments provide more flexibility for income recognition timing
Multi-year planning
Fluctuating income: PTET works best with consistent high income. For variable income, model multiple scenarios.
Federal rate changes: If federal rates decrease, PTET benefits diminish proportionally.
State planning: Consider domicile changes and how PTET affects multi-state tax planning.
Implementation complexity
Additional compliance: PTET adds entity-level filing requirements and payment deadlines
Estimated payments: Must coordinate entity and individual estimated payments
Record keeping: Track PTET payments and credits across entity and individual returns
When PTET doesn't make sense
Key takeaway: PTET works best as part of comprehensive tax strategy for high-earning consultants with consistent New York income and multi-member entity structures.
Key Takeaway: PTET should be evaluated alongside S-Corp elections, retirement planning, and multi-state considerations for optimal tax strategy.
Priya Sharma, CPA
Best for remote workers who have New York-sourced income but live in other states
PTET for non-NY resident freelancers
If you're a remote worker with New York clients but live elsewhere, PTET can still provide benefits — but requires careful multi-state coordination.
Source-based taxation
New York taxes income based on where services are performed, not where you live. Remote work performed outside NY generally isn't NY-sourced, but there are exceptions:
"Convenience rule": If working remotely for NY employer's convenience, income may still be NY-sourced
Client meetings: Days physically worked in NY create NY-sourced income
NY-based partnerships: Partnership income may have NY source regardless of where work is performed
PTET benefits for non-residents
Federal deduction: Same federal benefits as NY residents
Credit utilization: Use PTET credits against NY nonresident tax liability
Multi-state planning: Can help optimize total state tax burden
Potential complications
Resident state taxes: Your home state may not allow credit for PTET payments
Double taxation risk: Could pay both PTET and home state tax on the same income
Compliance complexity: Filing requirements in multiple states
Planning recommendations
1. Determine NY source income accurately
2. Model home state implications before electing
3. Consider domicile planning if PTET savings are substantial
4. **Coordinate with resident state credits and deductions
Key takeaway: Non-NY residents with NY-sourced income can benefit from PTET, but must carefully coordinate with home state tax obligations to avoid double taxation.
Key Takeaway: Non-NY residents can benefit from PTET on NY-sourced income, but must coordinate carefully with home state taxes to avoid double taxation.
Sources
- NY Tax Law Section 860-A — Pass-Through Entity Tax
- IRS Publication 535 — Business Expenses
Related Questions
Reviewed by Priya Sharma, CPA on February 28, 2026
This content is for educational purposes only and is not a substitute for professional tax advice. Consult a qualified tax professional for advice specific to your situation.