If you own part of an S corp or partnership that earns money in Missouri, there’s a good chance someone has asked whether you’re “doing the PTE thing.”
That’s shorthand for an optional Missouri tax that moves part of your state income tax off your personal return and onto the business’s.
Missouri created it in a law with the wonderfully dull name of the SALT Parity Act (SALT is short for state and local taxes), and it’s been available since 2022. Whether it’s worth doing depends on you and your co-owners, so we’ll go through how it works, what you get back, and the situations where we’d tell you to leave it alone.
The first question is what Missouri Pass-Through tax actually is.
What Is the Missouri Pass-Through Entity Tax?
It’s a tax your S corp or partnership can choose to pay on its Missouri income, so that you and your co-owners don’t pay that same tax on your personal returns. The Missouri Department of Revenue’s pass-through entity tax FAQ says the option applies beginning with tax years ending on or after December 31, 2022.
The reason anyone bothers is the federal return. When you pay Missouri tax personally, it counts toward the federal limit on deducting state and local taxes, and plenty of owners hit that limit. When the business pays the tax instead, it becomes a business deduction. IRS Notice 2020-75 says the partnership or S corporation “is allowed a deduction for the Specified Income Tax Payment in computing its taxable income for the taxable year in which the payment is made.”
Missouri gets the same tax either way, but paying it through the business can change your federal deduction, and that only matters if your business is allowed to make the choice.
So the next question is which businesses can.
S Corps and Partnerships Can Elect It, Including LLCs Taxed as Either
Only partnerships and S corporations can make the Missouri election, and what counts is how your business files with the IRS, whatever your formation paperwork happens to say. The DOR’s FAQ says the term partnership “shall include a limited liability company,” and it treats an LLC taxed as an S corporation the same way it treats any other S corp, so if you run a single-member LLC that files on your personal return, this one isn’t for you.
Your business also doesn’t need a Missouri address. The DOR answers “Yes” when asked whether an out-of-state partnership or S corporation that does business in Missouri can elect, which is good news for Metro East companies that send crews or invoices across the river every week.
If your business qualifies, the next thing to understand is the paperwork.
The Election Happens Once a Year on Form MO-PTE
You make the election by checking a box on a timely filed Form MO-PTE, and you make it again every year you want it. The statute, RSMo 143.436, says “A separate election shall be made for each tax year,” and the DOR adds that “the election will be irrevocable for that tax year.” So it’s worth deciding before the box gets checked, because there’s no taking it back that year.
The MO-PTE is an extra return on top of the one your business already files. The DOR says, “The filing of the MO-PTE does not substitute for a partnership filing its MO-1065 or an S corporation filing its MO-1120S.” It’s due by the fifteenth day of the fourth month after your tax year ends, which works out to April 15 for a calendar-year business. The 2025 MO-PTE instructions say the deadline is “automatically extended” when the business has a federal extension, though interest still runs from the original due date until the tax is paid.
The rate is tied to Missouri’s highest individual income tax rate, which has been coming down for a few years. The 2025 MO-PTE instructions apply 4.7%, and since the rate follows the top individual rate, check the current year’s form before you budget for it. A business that wants to pay early can use Form MO-PTEAP.
Once the business pays, the owners’ side of things starts.
Owners Get a Missouri Credit for Their Share of the Tax
Each owner of an electing business gets a credit on their Missouri return for their share of what the business paid, so Missouri doesn’t tax the same income twice. Under RSMo 143.436, the credit equals “such member’s direct and indirect pro rata share of the tax paid,” which means your slice of what the business paid, based on your ownership share. You claim it by attaching Form MO-TC to your Missouri return.
If your credit is bigger than your Missouri tax for the year, the leftover isn’t refunded, but the statute says it “may be carried forward” to a later year.
Owners who live outside Missouri get a nice paperwork break. The statute says a nonresident owner “shall not be required to file an income tax return” in Missouri when the only Missouri income comes from electing businesses that file and pay. And any owner can opt out of having the tax paid on their share, subject to Missouri’s opt-out procedures and filing requirements.
The DOR notes that “once an opt-out election is filed, it applies for all subsequent tax years, until an opt-out member revokes the election,” so an opt-out signed three years ago may still be quietly sitting in the file. That opt-out is also the key to the cases where staying out makes more sense.
When Does Electing the Missouri PTE Tax Not Make Sense?
The election mostly helps owners whose state and local taxes run past the federal limit on deducting them. If your Missouri tax, property tax and other state and local taxes already fit under that limit, you’re probably getting the full deduction on your personal return today, and moving the Missouri piece to the business may not add much.
It can also be an awkward fit when co-owners are in very different spots. One partner might have losses elsewhere that leave little Missouri tax for the credit to offset, while another has a big year. The opt-out lets that owner stay out while the other partner stays in.
Timing is the last thing to watch. Notice 2020-75 ties the federal deduction to the year the payment is made, so a business that pays with the April return is generally deducting it the following year.
That’s why some businesses pay before December 31 on Form MO-PTEAP. Whether that works for yours is worth talking through with whoever prepares your business tax returns before year-end. It gets one step more involved when Illinois is part of the picture.
Illinois and Missouri PTE Taxes Can Work Side by Side
Illinois has its own pass-through entity tax election, so a business earning income in both states can end up with two elections and two sets of rules. We covered the Illinois side in our post on the Illinois pass-through entity tax election, and it’s worth reading alongside this one if your business crosses the river.
The catch is how Missouri treats a pass-through tax paid to another state. For a Missouri resident, the DOR says you get a credit for your share of another state’s version only “as long as the tax in the other state is substantially similar to Missouri’s pass-through entity tax.” That credit is also stingier than the Missouri one, since the statute says it “shall not be refunded and shall not be carried forward.”
Whether another state’s tax counts as substantially similar is Missouri’s call, so we won’t guess at it here. If you live in Edwardsville and own a St. Louis business, or live in Clayton and own an Illinois one, both elections and both credits need to be looked at together, and our St. Louis CPA team does that every filing season.
With all the pieces laid out, the question in the title gets a lot easier to answer.
Should Your S Corp or Partnership Elect the Missouri PTE Tax?
Your business should seriously consider the election when its owners’ state and local taxes run past the federal limit, and a business-level deduction is worth more to them than the cost of one more return. It’s an entity-level election that can affect each owner differently, and for some businesses the honest answer is no.
Fall is the best time to decide, while there’s still room to make an early payment if the numbers call for one. You’ll want each owner’s expected state and local taxes, where each owner lives, and clean year-to-date profit, which is one more reason good monthly accounting pays off at tax time.
If you liked this one, you’ll probably also like our post on when an Illinois business should switch to an S Corp.
If you’re wondering whether the Missouri election belongs on this year’s return, reach out to Thompson Flaherty.
We’ll run the numbers for each owner and tell you whether to check the box or leave it blank.
Until next time
