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Small Business Tax Savings on State and Local Taxes is Now Law

Small Business Tax Savings on State and Local Taxes is Now Law

January 7, 2022 Last Edit: June 5, 2025

NFIB supported changes in how tax deductions are treated

Small Business Tax Savings on State and Local Taxes is Now Law

NFIB supported changes in how tax deductions are treated, that will benefit many small businesses, are now law. Often, small businesses file their business taxes on their personal income tax returns. Referred to as “flow through entities” these businesses include sole proprietors, partnerships, and Sub S corporations and partnerships. Due to changes in federal tax law, these businesses were only allowed to deduct $10,000 of their state and local tax (SALT) bill on their federal taxes while C corporations have been allowed to claim an unlimited SALT deduction. With the new changes, flow-through entities can choose to pay a different tax instead of the state income tax where the $10,000 SALT cap will not apply. The new flow-through entity tax option is available for businesses starting with tax year 2021.

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