NJ BAIT Election: The SALT Cap Workaround That Saves NJ Business Owners Thousands

BAIT can turn non-deductible SALT into a deductible business expense.

The NJ BAIT (Pass-Through Business Alternative Income Tax) election allows S-Corps, partnerships, and multi-member LLCs to pay New Jersey income tax at the entity level, converting non-deductible personal SALT into a fully deductible business expense—effectively bypassing the federal $10,000 SALT cap.

What Is BAIT?

BAIT allows eligible pass-through entities to pay NJ income tax at the entity level rather than passing all income through to owners' personal returns. This shifts the tax payment from personal (subject to the $10,000 SALT cap) to business (fully deductible).

Without BAIT

• Business income flows to your personal NJ return

• You pay NJ tax personally

• Federal SALT deduction capped at $10,000

With BAIT

• Entity pays NJ tax directly (deductible business expense)

• You receive a credit on your personal NJ return

• Same NJ tax liability, but larger federal deduction

Who Is Eligible for BAIT?

Eligible Entities

• S-Corporations (with valid NJ S-Corp election)

• Partnerships (general, limited, LLPs)

• Multi-member LLCs taxed as partnerships or S-Corps

Not Eligible

• Single-member LLCs (disregarded entities)

• Sole proprietorships

• Publicly traded partnerships

The entity must have at least one member liable for NJ tax at the time of election.

2025 BAIT Tax Rates

BAIT uses graduated rates based on the entity's distributive proceeds (taxable income allocated to members).

BAIT Tax Rates

Distributive Proceeds	BAIT Rate
$0 – $250,000	5.675%
$250,001 – $1,000,000	6.52%
Over $1,000,000	10.9%

How to Make the BAIT Election

Step 1: File Election (Form PTE-100)

The election must be made annually by the 15th day of the third month of the tax year.

• Calendar year entities: March 15

• Fiscal year entities: 15th day of 3rd month of fiscal year

The election is binding for the entire tax year and cannot be revoked after the deadline.

Step 2: Make Estimated Payments (Form PTE-150)

Quarterly estimated payments are due:

• April 15

• June 15

• September 15

• January 15 (following year)

Underpayment penalties apply if you don't pay at least 80% of current year liability or 100% of prior year liability.

Step 3: File Annual Return (Form PTE-200)

Due by the 15th day of the 4th month following the close of the tax year (April 15 for calendar-year entities). Extensions are available.

The Federal Tax Benefit: How BAIT Saves Money

Example Calculation

Scenario: You're a 50% owner of an NJ S-Corp with $400,000 of taxable income. Your share is $200,000. You're in the 35% federal tax bracket.

Without BAIT

• NJ tax on your share: ~$10,000 (paid personally)

• Federal SALT deduction: Limited to $10,000 cap

• Federal tax savings from SALT deduction: $3,500

• Net cost of NJ tax: $6,500

With BAIT

• BAIT paid by entity: ~$20,000 (on full $400,000)

• Your share (50%): $10,000

• Deductible at entity level: Full $10,000 (no SALT cap)

• Federal tax savings: $3,500

• Net cost of NJ tax: $6,500

• NJ credit on personal return: $10,000

Key difference: The BAIT payment reduces your share of pass-through income by $10,000, saving you $3,500 in federal tax that would otherwise be lost to the SALT cap.

Important Considerations

Non-Resident Owners

If your entity has owners in states that don't credit BAIT payments, they may face double taxation. New York and many other states recognize BAIT, but verify for each owner's state.

S-Corp Minimum Tax Still Applies

S-Corps remain subject to NJ's minimum CBT regardless of BAIT election:

NJ Minimum CBT for S-Corps

NJ Gross Receipts	Minimum Tax
Under $100,000	$375
$100,000 – $250,000	$562.50
$250,000 – $500,000	$750
$500,000 – $1,000,000	$1,000
Over $1,000,000	$2,000

Partnerships Use Single-Factor Sales Apportionment

Starting in 2023, partnerships must use single-factor sales apportionment for BAIT purposes. Only sales (receipts) attributable to NJ determine the portion of income subject to tax.

Should Your Business Elect BAIT?

BAIT Makes Sense If:

• Owners are in higher federal tax brackets (24%+)

• You already hit or exceed the $10,000 SALT cap

• You have substantial NJ business income

• All owners are in states that credit BAIT

BAIT May Not Make Sense If:

• You're a single-member LLC (not eligible)

• Owners include non-residents in states that don't credit BAIT

• Owners don't itemize federal deductions

• Administrative complexity outweighs tax savings

BAIT Checklist for NJ Business Owners

Before the Election

• Confirm entity type is eligible

• Verify NJ S-Corp election is on file (if applicable)

• Analyze all owners' tax situations for net benefit

• Review non-resident owner implications

Election Deadline (March 15 for Calendar Year)

• File Form PTE-100 by deadline

• Calendar quarterly estimated payment due dates

Quarterly

• Pay estimated BAIT using Form PTE-150

• Track payments for annual return

Annually

• File Form PTE-200 by April 15 (or extended deadline)

• Issue K-1s reflecting BAIT adjustments

• Owners claim credit on personal returns

How Monaco CPA Helps with BAIT

Monaco CPA helps Essex County and North Jersey business owners analyze BAIT eligibility and calculate potential federal savings, prepare and file elections and estimated payments, coordinate with multi-state owners to avoid double taxation, and integrate BAIT into year-round tax planning.

Schedule a Free Consultation

Phone: (862) 320-9554

Email: greg@monacocpa.cpa

Gregory Monaco, CPA, MBA — Livingston, NJ | Serving Essex County and all of New Jersey

Frequently Asked Questions

Can a single-member LLC elect BAIT?

No. Single-member LLCs are disregarded entities and not eligible. You could add a member or elect S-Corp status to become eligible.

Is the BAIT election permanent?

No. BAIT is an annual election. You can choose to elect or not each tax year based on your situation.

What if I miss the March 15 deadline?

The deadline is firm for calendar year filers. If you miss it, you cannot elect BAIT for that tax year.

Does BAIT affect my personal NJ tax return?

Yes. You'll claim a tax credit for your share of BAIT paid by the entity. Your K-1 will reflect the BAIT adjustment.

How does BAIT interact with NJ's CBT minimum tax?

S-Corps still owe the minimum CBT regardless of BAIT. The minimum tax is separate and still applies.

Last updated: December 2025. Tax laws change frequently. Consult with a qualified CPA for advice specific to your situation.