Where to Enter MD Elective PTE Taxes on 8825

[TaxGirl3]

Where do I enter MD Elective PTE Taxes on the 8825 (1065) so the state (Maryland) knows to add back the PTE taxes when calculating PTE income subject to PTE taxes?  Where do I enter the related income from a prior year overpayment?

Thank you!

[TaxGirl3]

Can anyone help?  @sjrcpa ?

Thank you!

[sjrcpa · Accepted solution]

Enter on the tax line. If they don't get added back on MD, make a manual adjustment.

[TaxGirl3]

Thanks for the response!  Edit:

Option 1.  It doesn't get added back to MD so I made an override in screen 38.271 .  That somehow changes the percentage of ownership on line 5a of Form 511 (I guess that's based on federal income), so I overrode the percentage of ownership as well.

Option 2.  Use the regular deductions screen (Screen 13).  Under 'Taxes' enter MD PTE taxes as a state tax and then subtract it in other taxes with a -1 in 'State if different'.

I ended up going with option 1.  Option 2 incorrectly uses the higher income amount (net income + MD tax addback) on lines 1 and 2 of Section A of the K-1.  Option A only does that to line 2.

[TaxGirl3]

UPDATE: Each override causes other issues in the return.  I did try the 'State and local taxes deducted [A]' box in screen 40.  Higher MD income still ends up on the K-1s.  And the K-1 overrides simply don't override.

Lacerte support has no idea what they are talking about.  This may not be an update to many of you.

[sjrcpa]

MD K-1 income should be higher than federal K-1 income. MD does not allow the deduction for PTET.

[TaxGirl3]

Yes, MD income on the 511 is higher and that's used to calculate the PTE tax.

But the higher MD income should not be reported on the MD K-1.   The MD K-1 uses the lower federal income because the shareholder or partner is taxed based on federal income (with a PTE credit addback, which doesn't necessarily line up with the deduction taken on the PTE tax return).

From the MD K-1 510/511 instructions for Section A: "Enter federal distributive or pro rata share of income from federal Schedule K-1"