PTETaxDesk / 2026 State PTET & $40k SALT Guides / Why Single-Member LLCs (Schedule C) Cannot Elect PTET - And 2 Ways to Fix It (Form 2553 or Spousal 1065)
Why Single-Member LLCs (Schedule C) Cannot Elect PTET - And 2 Ways to Fix It (Form 2553 or Spousal 1065)
Why Single-Member LLCs (Schedule C) Cannot Elect PTET - And 2 Ways to Fix It (Form 2553 or Spousal 1065)?
Because IRS Notice 2020-75 applies only to Partnerships (Form 1065) and S-Corporations (Form 1120-S), a disregarded Single-Member LLC on Schedule C cannot elect state PTET unless it either files Form 2553 to be taxed as an S-Corp or adds a second member (such as a spouse in non-community-property states) to file Form 1065.
Because IRS Notice 2020-75 applies only to Partnerships (Form 1065) and S-Corporations (Form 1120-S), a disregarded Single-Member LLC on Schedule C cannot elect state PTET unless it either files Form 2553 to be taxed as an S-Corp or adds a second member (such as a spouse in non-community-property states) to file Form 1065.
Open 2026 $40,000 SALT Cap vs. State PTET Calculator
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
Why Single-Member LLCs (Schedule C) Cannot Elect PTET - And 2 Ways to Fix It (Form 2553 or Spousal 1065)?
Because IRS Notice 2020-75 applies only to Partnerships (Form 1065) and S-Corporations (Form 1120-S), a disregarded Single-Member LLC on Schedule C cannot elect state PTET unless it either files Form 2553 to be taxed as an S-Corp or adds a second member (such as a spouse in non-community-property states) to file Form 1065.