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Change to PA Grantor Trust Rules

To the joy of many business owners, lawyers, and tax advisors alike, the last grantor trust holdout has finally capitulated. A bill has been signed into law that will have Pennsylvania conform with the federal tax treatment of grantor trusts. Pennsylvania is the last state to conform.

For federal tax purposes, a grantor trust is NOT treated as a separate taxable entity, and all income is taxed at the grantor level. For Pennsylvania though, the trust itself was responsible for the tax liability, which caused an additional tax filing, along with massive headaches when it came to figuring out how Pennsylvania taxpayers could get a credit for taxes paid to other states on the same income that is being taxed in Pennsylvania.

Unfortunately, the legislation is only effective in tax years beginning in 2025, but better late than never!

As always, we’re here to help.  Do not hesitate to contact us with any questions that you might have.

About the Author

Mark Heath

Mark is a Partner with McKonly & Asbury. Serving as Director of Tax Services, he brings a wealth of experience in federal, state, and international income as well as franchise tax issues for both publicly and privately held corporatio… Read more

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