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North Carolina Pass-Through Entity Tax


Content provided for general information. Talk to your advisor to learn about recent updates or other rules that may apply to your situation.

If you’re a partnership or S-corporation in North Carolina, tax help is on the way. After the SALT cap limited your deductions for state income taxes, new tax options help you get your deductions back.

Pass-Through Entity Tax Overview

The pass-through entity tax gives North Carolina S-corporations and partnerships an option to file entity tax returns and pay tax as a business instead of passing taxes through to the owners. This can give these pass-through entities a larger federal tax deduction.

  • Normal rule: Partnerships and S-corporations don’t pay income taxes. Each owner reports their share of the profit on their personal income tax return and pays their personal income tax rate.
  • New option: Partnerships and S-corporations can opt to pay income taxes at the state level. The business taxes become a business deduction instead of a personal tax.

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