A Senate Republican priority bill authored by State Sen. Scott Baldwin (R-Noblesville) to provide tax relief to Hoosier businesses was signed into law by Gov. Eric Holcomb today.
Senate Enrolled Act 2 changes state tax law so that LLCs and S Corps can deduct all state tax payments on federal tax returns, on behalf of owners, resulting in what could be over $100 million in federal tax savings for Hoosier small businesses over the next two tax year filings.
"I am really appreciative of the effort that went into passing this piece of bipartisan legislation," Baldwin said. "Seeing the commitment to moving this forward in a timely manner reinforces the legislature's and state's commitment to helping Hoosier small businesses. This new law builds on our already strong business climate and continues to make Indiana a great place to live and work."
Under federal law, businesses can deduct their state tax payments from their federal tax liability. For businesses that pay income tax as a corporation, such as C corporations, which are normally larger businesses, this deduction is unlimited. However, for companies where the owners or shareholders pay their own individual income taxes, such as LLCs and S Corps, this deduction is limited to $10,000.
SEA 2 allows LLCs and S Corps to receive an unlimited federal deduction for their state tax payments, similar to C Corps.
Eligible businesses can take advantage of this new law on 2022 taxes being filed this year, and Hoosiers are urged to consult their tax advisors for details.
