A buried provision in Minnesota's latest tax bill gives owners of trucking and transportation companies a way to claim federal tax deductions most business owners can't—but only through the end of 202
Most trucking and transportation business owners don't realize Minnesota just revived a tax election that could save them thousands in federal taxes. And it's retroactive to January 1, 2026.
Here's what happened: Minnesota's HF2438, a comprehensive taxation bill passed to finance state and local government operations, includes a provision (Article 2, Section 9, pages 33, lines 33.1–33.5) that brings back the pass-through entity (PTE) tax election. If you own a partnership, LLC taxed as a partnership, or S corporation, this matters to you.
Normally, income from partnerships, LLCs, and S corporations flows through to owners' personal tax returns. That means you pay individual income tax rates on that business income. The federal government also limits how much you can deduct for state and local taxes (SALT) on your personal return—capped at $10,000 per year.
The PTE tax election changes this. Under the revived provision, your business entity itself can elect to pay Minnesota income tax at the highest individual rate (9.85%) on the income allocated to owners. Here's the key: when your entity pays that tax, it generates a federal SALT deduction at the entity level. That deduction bypasses the $10,000 personal SALT cap.
For trucking and transportation companies with significant state tax liability and multiple owners, this can mean real money. Instead of each owner hitting the $10,000 federal SALT cap individually, the entity-level deduction isn't subject to that limit.
If your trucking or transportation business is structured as a partnership, multi-member LLC taxed as a partnership, or S corporation, you're eligible to make this election. Sole proprietors and C corporations don't qualify.
The benefit depends on your specific situation: your Minnesota tax liability, your federal tax bracket, and whether you're already maxed out on the $10,000 SALT deduction. Not every business will benefit equally.
The provision was retroactively revived and reenacted effective January 1, 2026. That means if you're eligible and want to use this election, you may be able to claim it for the 2026 tax year even though the bill was passed later.
However, there's an expiration date: the election expires for taxable years beginning after December 31, 2027. This is a temporary window, not a permanent tax change. If you're considering this election, you'll want to plan accordingly and understand that it's available for roughly two tax years.
The mechanics of making this election and calculating the benefit require coordination with your accountant or tax advisor. They'll need to review your entity structure, income allocation, and federal tax situation to determine whether electing the PTE tax makes sense for your business.
Given the retroactive effective date and the December 31, 2027 expiration, it's worth discussing with your tax professional soon—especially if you're already paying significant Minnesota income tax and hitting federal SALT limits.
Source: Minnesota HF2438, Article 2, Section 9, amending Minn. Stat. § 289A.08, subd. 7a.