If you own a Louisiana LLC or S corporation, you’ve probably heard about the pass-through entity tax election, or PTE election. The pitch usually goes something like this: let the business pay your state income tax, and you get a bigger federal deduction.
That’s true for some owners. For others, it saves little or nothing and ties the business to an election that’s hard to get out of. Here’s how it works under current Louisiana law and how to tell which group you’re in.
How the election works
An LLC taxed as a partnership normally doesn’t pay Louisiana income tax itself. The profit flows through to the owners, and each owner pays tax on their share on their personal return. Starting with 2026 tax years, S corporations work the same way in Louisiana. Before 2026, Louisiana taxed S corporations much like regular corporations unless the corporation elected a separate exclusion for certain income.
Louisiana law (La. R.S. 47:287.732.2) lets the business elect to pay that tax at the entity level instead. The owners then leave that income off their own Louisiana returns, so it’s only taxed once.
Most multi-member LLCs and S corporations can elect. There are two exceptions. A partnership that files a Louisiana composite return can’t make the election. And starting with 2026 tax years, an S corporation has to pick between filing a composite return for its out-of-state shareholders and making the PTE election. It can’t do both in the same year.
The rate is a flat 3% of Louisiana taxable income for 2025 and later. That’s the same rate individuals pay, since Louisiana moved to a flat 3% individual income tax in 2025. So on the state side, the tax is basically a wash.
Making the election
You elect by emailing Form R-6980 to the Louisiana Department of Revenue. The deadline is generous. You can file during the year before the election starts, during the election year, or up to the 15th day of the fourth month after that year ends. A calendar-year business that wants the election for 2026 has until April 15, 2027. The election takes effect once LDR accepts it. LDR can accept a late election for reasonable cause, like an owner’s death or a federally declared disaster, but wanting the tax savings doesn’t count.
The Department won’t process the form without these attachments:
- Written approval from owners holding more than half of the ownership interest, measured by capital account balances
- A list of every owner, with addresses and tax ID numbers
- The last three years of federal returns, including K-1s
- Your articles of organization, operating agreement, or partnership agreement
- A list of any unused Louisiana net operating losses and tax credits
After that, the business files Louisiana’s corporation income tax return electronically each year, with the K-1s and Forms R-6981 and R-6982 attached. For 2025 and later, that return is Form CIT-620. Returns for 2024 and earlier were filed on Form CIFT-620. Owners still file their own Louisiana returns. They just exclude the income the business already paid tax on and attach Form R-6981. Residents claim the exclusion on Schedule E of Form IT-540, and nonresidents use the NPR Worksheet on Form IT-540B. Interest, dividends, and any other income the entity didn’t pay tax on stay taxable to the owner.
Where the savings come from
Since the Louisiana tax is 3% either way, any savings show up on your federal return.
When you pay state income tax yourself, it goes into your federal state and local tax (SALT) deduction, and that deduction is capped. The 2025 federal tax law set the cap at $40,000 for 2025 and raises it 1% a year through 2029. If your modified adjusted gross income (MAGI) is over $500,000, the cap shrinks by 30 cents for every dollar over that line, but never below $10,000. In 2030, the cap goes back to $10,000 for everyone.
When the business pays the tax through the PTE election, the business deducts it as an ordinary expense. The SALT cap doesn’t touch it. Congress considered limiting that workaround in 2025 and left it alone.
In short, the election pays off when your state and local taxes are already bumping into the cap.
An owner over the cap
Say a married couple owns a Louisiana LLC taxed as a partnership. Their share of the business income is $700,000, and their MAGI is $850,000. At that income, their 2025 SALT cap drops to the $10,000 floor, and their property taxes already use all of it.
| Without the election | With the election | |
|---|---|---|
| Louisiana tax on the business income (3%) | $21,000, paid by the owners | $21,000, paid by the LLC |
| Federal deduction for that tax | $0, because they’re over the SALT cap | $21,000, as a business expense |
| Federal tax saved at the 37% bracket | $0 | About $7,770 |
If the couple also gets the full 20% qualified business income (QBI) deduction, the savings come in closer to $5,900. The QBI deduction drops them into the 35% bracket, and the entity-level tax lowers their qualified business income too. At this income level, the full QBI deduction depends on the business’s W-2 wages and property, and owners of service businesses like law or accounting firms don’t get it at all. Either way, they pay the same Louisiana tax and keep several thousand dollars more each year. If they’re active in the business, the lower partnership income can also trim their self-employment tax a bit.
An owner under the cap
Now take a married couple with $200,000 of Louisiana business income and $250,000 of MAGI. Their Louisiana tax on the business income is $6,000, and they pay $5,000 in property taxes. That $11,000 is well under the $40,000 cap. It’s also well under the 2025 federal standard deduction of $31,500 for a joint return, so unless they have a large mortgage or big charitable gifts, they probably take the standard deduction and get no federal benefit from their state taxes today.
The election helps them, just not much. It turns the $6,000 of Louisiana tax into a business deduction they wouldn’t otherwise get. At the 22% bracket, after the QBI effect, that’s worth about $1,050 a year. If they itemized instead, the election would add very little, since they can already deduct the full $11,000.
For some owners, it can even cost a little at the state level. Once the business pays 3% on every dollar of profit, that income no longer gets the benefit of the owner’s Louisiana standard deduction (for 2025, $25,000 for joint and head-of-household returns and $12,500 for single filers, with inflation adjustments starting in 2026). That only matters if the owner doesn’t have enough other income, like wages or a spouse’s salary, to use up the standard deduction. In that case, the extra Louisiana tax tops out at about $750 a year on a joint return or $375 on a single return.
Who should take a closer look
The election is usually worth modeling if your MAGI is over $500,000, your property and other state taxes already eat most of your SALT cap, and you expect that to hold for several years. Owners who take the federal standard deduction can see a smaller benefit too. The election gets more attractive in 2030, when the cap falls back to $10,000 for everyone.
What to think through before you elect
The election doesn’t expire. It covers the year you make it and every year after, until the owners end it.
Ending it takes some lead time. Owners holding more than half of the ownership interest have to sign off, and the business files Form R-6983. For a calendar-year business, that request has to be complete by November 1 to take effect the next year. After you terminate, you can’t elect again for five tax years.
Losses stay where they started. Net operating losses and credits from election years belong to the entity, and they don’t pass through to the owners, even after the election ends. Losses and credits the owners had from before the election stay with the owners, and the business can’t use them. If you expect a loss year, that matters.
Corporate owners don’t get the exclusion. It’s only available to individuals, estates, and trusts. If a corporation owns part of your LLC, its share gets taxed again at the corporate level.
Owners in other states should check with their own preparer. A nonresident owner excludes the Louisiana income on Form IT-540B, but whether their home state gives them credit for tax the business paid to Louisiana depends on that state’s rules.
The election applies to every owner, whether it helps them or not. One partner over the SALT cap might save a lot while another under the cap gets nothing. Agree up front on how distributions will account for the tax the business pays.
Before you file, it helps to answer these questions:
- What is each owner’s MAGI, and how much of their SALT cap is already used?
- Do we expect profits or losses over the next three to five years?
- Are any of our owners corporations or out-of-state residents?
- If we’re an S corporation, do we file a composite return for nonresident shareholders today?
- Does our operating agreement say how distributions work when the business pays the owners’ tax?
Frequently asked questions
Can a single-member LLC make the Louisiana PTE election?
Only if it has elected to be taxed as an S corporation. A single-member LLC that’s treated as a disregarded entity isn’t a partnership or an S corporation for federal purposes, so it can’t elect.
What rate does the business pay?
A flat 3% of Louisiana taxable income for tax years starting in 2025 or later.
Is it too late to elect for 2026?
No. A calendar-year business can file Form R-6980 for 2026 any time through April 15, 2027.
Do the owners still file Louisiana returns?
Yes. They file as usual, exclude the income the business already paid tax on, and attach Form R-6981.
Did the 2025 federal tax law get rid of this strategy?
No. It raised the SALT cap but left the entity-level deduction for PTE taxes in place.
Talk it through with us first
Whether the PTE election makes sense comes down to each owner’s income, where the business is headed, and where the owners live. At Strategic Business Advisors, we can run the numbers for your business, show each owner what they’d save, and handle the filing if it’s the right call. Contact us to set up a review.
This article reflects Louisiana and federal law as of October 2026. Tax rules change often, so talk to a tax professional before making an election.
Sources
- LDR: Income tax rates for S corps and pass-through entities making the PTE election
- LDR Revenue Information Bulletin 25-012: Individual income tax reform
- LDR Form R-6980: Pass-Through Entity Tax Election (2026)
- La. Admin. Code tit. 61, § I-1001: Election of pass-through entities
- LDR Revenue Information Bulletin 23-022: Act 450 changes to the PTE election
- LDR Revenue Information Bulletin 25-032: S corporation changes under Act 382
- Liskow: LDR finalizes pass-through entity election rules
- Cooley: Federal tax legislation extends and increases SALT cap, preserves PTET workarounds
- Tax Foundation: 2025 federal tax brackets
- LDR: Corporate income tax and franchise tax repeal