Missouri PTET Guide
How to Make a Missouri PTET Election: The SALT Parity Act, Form MO-PTE, and the 4.7% Rate
You own a profitable S corporation in Missouri, your property tax and state income tax already use up the federal cap on state and local deductions, and the rest of your Missouri tax bill is doing nothing for you on your federal return. Missouri's SALT Parity Act is the fix. Here is who can elect, how the Form MO-PTE election works at the 4.7% rate, and what it is worth, with a theoretical example.
Most of my Missouri business owners hit the same wall. They pay Missouri income tax on their business profit and property tax on a house, and by the time they add those up they have blown past the federal cap on state and local deductions. The state income tax on the business is then a cost they cannot deduct. The Missouri pass-through entity tax turns that dead weight back into a live federal deduction, and the election is simpler than its paperwork looks.
What the SALT Parity Act actually does
The Missouri SALT Parity Act, codified at Section 143.436 of the Revised Statutes of Missouri, lets an S corporation or partnership elect to pay Missouri income tax at the entity level instead of passing that income straight through to its owners. It took effect for tax years ending on or after December 31, 2022, under RSMo 143.436, enacted by House Bill 2400 and signed on June 30, 2022. The point is federal, not state. State income tax paid by the entity is deductible by the entity on its federal return, so the election converts a state tax that most owners can no longer fully deduct on Schedule A into a federal deduction the business takes before the income ever reaches them.
The federal blessing for this comes from IRS Notice 2020-75, in which the IRS said it would issue regulations clarifying that state and local income taxes imposed on and paid by a partnership or S corporation are deductible by the entity in computing its non-separately-stated income. That entity-level deduction is not subject to the individual cap under IRC §164(b)(6). More than 35 states have built an elective pass-through entity tax on top of that notice.
Which Missouri businesses can elect
Any Missouri S corporation or partnership can elect, and that includes a multi-member LLC taxed as a partnership. A single-member LLC taxed as a disregarded entity has nothing to elect, because it files on the owner's return rather than filing its own. To get this deduction, a single-member LLC owner should elect S-Corp status first so the business files its own return, then make the PTET election on top.
How the election works, and the 4.7% rate
You make the Missouri PTET election by filing Form MO-PTE, the Pass-Through Entity Income Tax Return, for the year you want it in effect. The election is annual, so you make it again each year by filing that return on time. Form MO-PTE is due the fifteenth day of the fourth month after the entity's tax year closes, which is April 15 for a calendar-year S corporation or partnership. The current Form MO-PTE and the department's SALT Parity Act FAQ are both on the Missouri Department of Revenue site.
The Missouri pass-through entity tax is imposed at the state's highest individual income tax rate under Section 143.011, which is 4.7% for both 2025 and 2026. That rate stepped down from 4.8% in 2024 under the revenue-trigger cuts the legislature adopted in 2022, and it can fall further in future years if state collections hit the statutory triggers. Because the tax tracks the top individual rate under RSMo 143.011, the entity pays roughly what its owners would have paid on the same income. If the tax will be large, pay it in quarterly estimates rather than all at once on the return.
How owners claim the credit
Each owner of an electing entity claims a credit against their Missouri individual income tax equal to their pro rata share of the pass-through entity tax the business paid, reported on Form MO-TC with their Missouri return. The credit is nonrefundable and nontransferable, it cannot be carried back, and any unused amount carries forward with no expiration. In practice the owner still reports their share of the business income on their Missouri 1040, then wipes out the Missouri tax on that income with the credit. The state gets the same money, just from the entity, and the owner picks up a federal deduction the cap would otherwise have denied.
One newer wrinkle matters for partnerships with mixed ownership. House Bill 1912, effective August 28, 2024, added a member opt-out election, so an owner who would be worse off under the election can decline it for tax years ending on or after that date. That is rare for an owner-operated S corporation, but it can matter when a partner is a corporation or an out-of-state resident.
What the election is worth
The benefit is worth the owner's federal marginal rate times the Missouri tax the cap would otherwise have wasted. Consider a theoretical married couple who own a Missouri S corporation with $400,000 of flow-through profit after a reasonable salary. Their household income is high enough that the federal cap on state and local taxes is already consumed by property tax, so none of the Missouri income tax on the business helps them federally. They sit in the 35% federal bracket. This is an illustration, not an actual client.
Without the election
Owner pays Missouri tax, deducts nothing
SALT cap already used up by property tax. State income tax is a nondeductible cost.
With the MO-PTE election
Entity pays, entity deducts
Same Missouri tax, offset by the owner's credit. The $18,800 deduction is the win.
The Missouri tax bill is identical in both columns. The couple owes the state $18,800 either way, and the owner credit on Form MO-TC offsets it on their Missouri return. What changes is the federal side, where the election produces an $18,800 deduction the cap would have thrown away. At 35%, that is $6,580 a year.
Is it still worth it after the $40,000 SALT cap
The One Big Beautiful Bill Act raised the federal cap on state and local tax deductions from $10,000 to $40,000 for 2025, rising to $40,400 for 2026, which made some owners wonder whether the workaround still matters. For most profitable Missouri businesses, yes. The 2025 cap of $40,000 on the state and local tax itemized deduction phases down for higher earners, dropping by 30 cents for every dollar of modified adjusted gross income over $500,000 until it reaches a $10,000 floor around $600,000. The pass-through entity tax sidesteps that cap entirely, because the Missouri tax is paid and deducted by the business rather than claimed on the owner's Schedule A. Property tax plus state income tax will consume a $40,000 cap quickly, and for higher earners that cap is shrinking back toward $10,000. The higher cap helped, but it did not replace the election.
Before you file
Two cautions. The credit is nonrefundable, so do not have the entity pay more Missouri tax than the owners actually owe, or you will strand money in a carryforward. And if you have owners in other states, confirm their home state gives a resident credit for the Missouri entity tax before you assume everyone comes out ahead, which is the case the opt-out exists for. The PTET only helps once you have a real entity and real profit, so run your federal payroll-tax math with the EntityIQ S-Corp tax calculator first, then layer the Missouri election on top. For the federal mechanics, see our guides on the PTET SALT cap workaround and whether the PTET still beats the $40,000 cap.
This article is educational and is not legal or tax advice. The figures above use 2025 and 2026 numbers, and the owners are theoretical. Consult a qualified Missouri tax professional before making the election.