How to make the Iowa PTET election.

Iowa’s Pass-Through Entity Tax lets your business pay state income tax for its owners and deduct it federally, outside the SALT cap. Here’s when and how to elect for 2026, and how to pay.

Can your business elect?

Entities taxed as partnerships or S corporations that file an IA 1065 or IA 1120S, including general partnerships, LLCs, LLPs, and LPs. Publicly traded partnerships under IRC Section 7704 and single-member LLCs or other disregarded entities cannot elect.

The election is binding on the entity and all partners or shareholders; owners cannot opt out. It is made by a person authorized to sign the return and bind the entity. Insurance company and credit union owners exempt under Iowa Code Section 422.34 cannot claim the credit. An electing entity that is itself an owner of another electing entity may use the PTET credits it receives against its own PTET.

Rate: 3.8%, the Iowa individual income tax rate under Iowa Code Section 422.5. A flat rate with no brackets.

The entity's Iowa-source taxable income (Iowa-source distributive items allocated and apportioned to Iowa), computed at the entity level regardless of owners' residency. Resident owners' non-Iowa income is not included. Net operating loss carryovers and the qualified business income deduction are not allowed.

Available for 2026. Iowa's PTET (Iowa Code Section 422.16C, enacted by 2023 Iowa Acts chapter 78) applies only in years the federal SALT limitation under IRC Section 164(b)(6) applies, and the Department states that because of federal P.L. 119-21 the election is no longer scheduled to expire. New to PTET? See how the election works.

Deadlines

Step	Due for 2026
1st estimated payment	April 30, 2026
2nd estimated payment	June 30, 2026
3rd estimated payment	September 30, 2026
4th estimated payment	December 31, 2026
Return and PTET due	April 30, 2027
Extended return	November 1, 2027
Election deadline	November 1, 2027

These dates are for a calendar-year business. Pay at least two business days early, since state payment sites slow down on deadline days.

Electing, step by step

Deadline: Six months after the original due date of the IA 1065 or IA 1120S. For a calendar-year 2026 entity the original due date is April 30, 2027, so six months later is Saturday, October 30, 2027; under Iowa Code Section 421.9A a filing due on a weekend is timely on the next business day, November 1, 2027.

Start with 2025 IA 1065, Iowa Partnership Return of Income (41-016), from the Iowa Department of Revenue.

Choose one method: elect on the 2026 return, or submit a separate PTET election in GovConnectIowa before filing the return.
On the return: check the 'Pass-through entity tax (PTET) election' box in Part 5 of the IA 1065 (partnerships) or Part 6 of the IA 1120S (S corporations), and complete that part.
In GovConnectIowa: log in, open the entity's partnership or S corporation account, and in the accounts panel select 'Make a PTET Election (tax year 2023 or later)'.
Make the election no later than six months after the original due date of the return (November 1, 2027 for a calendar-year 2026 entity). The election is made each year and is irrevocable.

2025 IA 1065, Iowa Partnership Return of Income (41-016), page 4, showing the line used to make the Iowa PTET election: Pass-through entity tax (PTET) election. — The election: “Pass-through entity tax (PTET) election”

Paying the tax, step by step

Required when net PTET after allowable credits is expected to exceed $1,000. Installments are due on the last day of the fourth, sixth, ninth, and twelfth months of the tax year: April 30, June 30, September 30, and December 31, 2026 for a calendar-year entity. Underpayment is computed on Form IA 2220, and the prior-year safe harbor is not available to an entity that did not elect PTET in the prior year.

What you need

Nothing to set up. GovConnectIowa takes payments without an account.
The entity's FEIN or Iowa business eFile number (BEN).
The 2026 tax period and installment amount.
The business bank account routing and account numbers, or a card. If the bank blocks ACH debits, give it the Department's Company ID 9426004574.

Start at GovConnectIowa, Iowa's official site.

Log in to GovConnectIowa, or use Quick Pay through the Make a Payment link on the GovConnectIowa homepage (no logon, but the account must be validated).
Select the entity's partnership account or S corporation account. PTET payments go to that account.
Choose the 2026 tax period and the estimated payment, and enter the amount.
Pay by bank account or credit card (card payments carry a vendor service fee). First-time bank payments can take up to 5 business days to verify.
To pay by check, print a payment voucher in GovConnectIowa (Print a Payment Voucher) and mail it with the check.

Filing the return: IA 1065 (partnerships) or IA 1120S (S corporations), due April 30, 2027 for a calendar-year 2026 entity, with the PTET due by that original due date. An electing entity gets the automatic six-month filing extension only if at least 90% of the total tax is paid by April 30, 2027.

Keep the PTET separate from your personal estimates. The business pays the PTET from its own account under its own ID. Once it does, each owner's personal Iowa estimates can usually drop by the credit they expect, so the same tax is not paid twice.

Claiming the credit

Owners receive a refundable credit equal to their share of the PTET paid multiplied by 96.2% (100% minus the 3.8% individual rate), allocated in the same ratio as taxable income and reported on the Iowa Schedule K-1. Individuals claim it on IA Schedule CC and IA 1040 line 27, and any excess is refunded or credited to the next year.

Good to know

The owner credit is 96.2% of the PTET paid, not 100%, because Iowa reduces the credit by the individual tax rate.
An electing entity is not required to file an IA PTE-C composite return for that year.
A nonresident individual whose only Iowa-source income is from electing entities, and whose credit covers the Iowa liability, is not required to file an IA 1040; nonresident owners also do not make individual estimated payments on that income.
For tax years 2023 and later there is no Iowa add-back; PTET is deductible and refunds are taxable to the same extent as federally.
Business credits other than the franchise tax credit and PTET or composite credits received from other entities cannot reduce the PTET.
Paying your personal Iowa estimates? See how to pay Iowa estimated taxes.
Business in more than one state? Each state has a guide of its own.

Official sources

Checked October 2026 against the Iowa Department of Revenue's own publications and Iowa Code Section 422.16C.

This guide is for general education and reflects rules as of October 2026. Tax law and agency websites change, and your situation may have details that change the answer. Please talk with your tax professional before acting on it.