PTETaxDesk / 2026 State PTET & $40k SALT Guides / Cash vs. Accrual PTET Deduction Timing (IRS Notice 2020-75): The December 31 Payment Rule
Cash vs. Accrual PTET Deduction Timing (IRS Notice 2020-75): The December 31 Payment Rule
Cash vs. Accrual PTET Deduction Timing (IRS Notice 2020-75)?
Under IRS Notice 2020-75 and IRC § 461, a cash-basis S-Corporation or Partnership can deduct state PTET on its 2026 federal tax return only for PTET payments actually remitted on or before December 31, 2026; fourth-quarter vouchers paid in January 2027 are deductible on the 2027 federal return.
Under IRS Notice 2020-75 and IRC § 461, a cash-basis S-Corporation or Partnership can deduct state PTET on its 2026 federal tax return only for PTET payments actually remitted on or before December 31, 2026; fourth-quarter vouchers paid in January 2027 are deductible on the 2027 federal return.
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2026 PTET & SALT Compliance Checklist
- Adopt a Written Partner/Shareholder PTET Consent Resolution: Keep signed authorization in your corporate or partnership minute book.
- Remit Cash-Basis Vouchers Before December 31, 2026: Under IRS Notice 2020-75, cash-basis entities can deduct 2026 PTET only to the extent paid by December 31, 2026.
- Avoid Overpayment Refunds (IRC § 111): Base your Q4 PTET payment on actual projected 2026 state liability so next year's state refund isn't recaptured as ordinary federal income.
Frequently Asked Questions
Cash vs. Accrual PTET Deduction Timing (IRS Notice 2020-75)?
Under IRS Notice 2020-75 and IRC § 461, a cash-basis S-Corporation or Partnership can deduct state PTET on its 2026 federal tax return only for PTET payments actually remitted on or before December 31, 2026; fourth-quarter vouchers paid in January 2027 are deductible on the 2027 federal return.