What is the Pass-Through Entity Tax?

The Pass-Through Entity (PTE) Tax — What It Means for Insurance Agents

You may have heard about the “PTE tax” or the “workaround for the $10,000 SALT cap,” but that probably sounds confusing if you’re not sure whether you itemize or take the standard deduction on your personal tax return.

Here’s the good news: the PTE tax can benefit you either way — especially if you’re an insurance agent operating as an S-Corp (or partnership) in a state that allows it.

In short, the PTE election lets your business pay your state income tax directly—as a business expense—rather than paying it personally. Since it’s paid by the S-Corp, it becomes deductible at the federal level, which lowers your taxable business income and, ultimately, your federal tax bill.

If your state allows this election (and most do now), it’s usually a no-brainer to opt in. However, if you’re in a state with no income tax or one that doesn’t yet allow the PTE option, it won’t apply to you.

Just like any other deductible expense—think rent, marketing, or office supplies—the PTE payment must be made by December 31st to count as a deduction for that year. Each state has its own process and deadline for making the election:

• New York – Election due by March 15th of the same year.

• New Jersey – Election due by January 31st of the following year.

• Many other states (like Georgia, Colorado, or Minnesota) – You can elect when filing the return.

Bottom line: the PTE election helps insurance agents keep more of what they earn by turning personal state taxes into deductible business expenses. It’s a smart move for S-Corp owners who want to save on federal taxes while prepaying state taxes they’d owe anyway.

Have questions about whether your state allows the PTE election or how to make the payment? Our team at Club Capital is here to help you navigate it and make sure you’re taking full advantage of available tax savings.