Should my S corporation or partnership elect New York PTET, and by when?

Without the election, each owner pays New York tax on their share of the profit and can deduct it federally only as an itemized deduction, up to the cap on state and local taxes.

With the election, the partnership or S corporation pays the tax instead. The owners claim their share of it as a credit against their own New York tax on Form IT-653 (tax.ny.gov). The IRS treats the tax as a deduction of the business, not of the owners, so the cap does not apply to it (IRS Notice 2020-75).

• Partnerships, including LLCs taxed as partnerships, that must file a New York partnership return (tax.ny.gov).
• New York S corporations, including LLCs taxed as S corporations.
• Not eligible: sole proprietors, disregarded single-member LLCs, trusts, non-profits and C corporations.

Only a person authorized to bind the business — a partner, member, officer, manager or shareholder with that authority — can make the election, through the business’s Online Services account. Your accountant cannot make it for you (tax.ny.gov).

• March 15, 2027: last day to elect for 2027. A business that elected for 2026 also files its 2026 PTET return, or requests a six-month extension, and pays any 2026 PTET still unpaid. A date on a weekend or holiday moves to the next business day (tax.ny.gov).
• March 15, June 15, September 15 and December 15, 2027: estimated payments, each at least 25% of the year’s required payment. Payments go by ACH debit through Online Services only.
• Until March 15, 2027: both elections can be revoked up to the due date of the first estimated payment, and neither after it (tax.ny.gov).
• March 15, 2028: the annual PTET return for 2027, or a request for six more months to file it, not to pay.

The tax is figured on the business’s PTE taxable income. For a resident S corporation, whose shareholders all live in New York, that is all its income. An S corporation with a shareholder outside New York can still elect, as a standard S corporation taxed on the New York source income of all its shareholders. For a partnership, it is all the income of partners who are New York residents plus the New York source income of nonresident partners. Income of corporate partners is left out (tax.ny.gov).

Rates from tax.ny.gov.

The city tax is a separate election, made together with the state election by the same March 15 deadline (tax.ny.gov). A business can elect it only if it elects the state PTET for the same year and:

• it is a partnership with at least one partner who is a New York City resident, or
• it is an S corporation taxed as a resident S corporation for PTET whose shareholders are all city residents.

The rate is a flat 3.876% of the income flowing to city resident owners (tax.ny.gov). Those owners claim it on Form IT-653 too. The estimated payment dates, the annual return and the extension are shared with the state tax.

The 2025 federal tax law raised the cap on deducting state and local taxes from $10,000 to $40,000 for 2025, rising 1% a year through 2029: $40,804 for 2027. For owners with modified adjusted gross income over $510,050 in 2027, the cap is reduced by 30% of the excess, but not below $10,000; married people filing separately get half of each. The cap goes back to $10,000 for 2030 (Schedule A instructions for 2025; Public Law 119-21, section 70120).

So PTET now pays mainly when the owner takes the standard deduction, when their own state and local taxes are already over the cap (state, city and property tax on a New York house can do it), or when their income is over the phase-down threshold. An owner who itemizes and stays under the cap gains little: the election only moves a deductible tax from their return to the business’s.

A Brooklyn S corporation has two shareholders who live in Brooklyn and split $400,000 of profit equally, figured before the city corporation tax and the PTET, both of which are added back to reach PTE taxable income (tax.ny.gov). It elects both the state and the city PTET for 2027 as a resident S corporation.

• State PTET: 6.85% × $400,000 = $27,400.
• City PTET: 3.876% × $400,000 = $15,504.
• Total paid by the business: $42,904, in four estimated payments of $10,726 on March 15, June 15, September 15 and December 15, 2027.

Each owner claims a $21,452 credit on Form IT-653 and adds the same amount back to income on Form IT-225; each owner’s federal income from the corporation drops by $21,452 (tax.ny.gov).

In those cases, that $42,904 is a new federal deduction. At a 24% federal rate, for example for owners filing jointly, it saves about $10,300 between them, less what the smaller profit takes off any qualified business income deduction they claim. If both itemize and are under the cap, the saving is close to zero.

• Cash earlier. Owners may count the expected credit when they figure their own 2027 estimates on Form IT-2105, so the business’s payments mostly replace theirs (tax.ny.gov). What changes is timing: the first payment moves from April 15 to March 15, before the business knows its year, and the last from January 2028 to December 15, 2027.
• Payments stay with the business. If the year ends in a loss, the payments cannot be moved to the owners’ own accounts; the business claims a refund when it files the PTET return (tax.ny.gov).
• Missed payments. Late or short estimated payments bring penalty and interest. The business cannot reduce the penalty by showing that its income came late in the year.

Your year-end and filing dates are in the New York tax deadlines guide. For help with the returns, see tax filing.