Introduction to Partnership Taxation

Understanding Partnerships

A partnership is generally a pass-through entity for federal income tax purposes. The partnership itself usually does not pay federal income tax. Instead, income, deductions, gains, losses, and credits flow through to the partners, who report their allocated share on their individual or business tax returns.

• Separate legal entity under many state laws.
• Generally not subject to federal income tax at the entity level.
• Income and losses pass through to partners.
• Partners report allocated items on their own returns.