How to Complete and File Virginia Form 502PTET: Election and Schedule VK-1

Virginia Form 502PTET is the elective entity-level income tax return that a pass-through entity files to pay Virginia tax at a flat 5.75 percent on behalf of its eligible owners. For calendar-year filers it is due April 15, must be filed electronically through Virginia Tax’s online business portal, and must be accompanied by a Schedule VK-1 for every owner so eligible owners can claim a refundable credit on their individual Virginia returns.

Who Can Elect

Any entity treated as a pass-through for federal income tax purposes can elect. Virginia’s statute lists S corporations, general partnerships, limited partnerships, limited liability partnerships, limited liability companies, professional limited liability companies, and business trusts as qualifying entity types.¹

The entity does not have to be owned entirely by eligible owners. The tax applies only to income shares attributable to eligible owners, so a mixed ownership structure can still elect.² An eligible owner is a direct owner that is either a natural person subject to Virginia individual income tax, or an estate or trust subject to Virginia fiduciary income tax.¹ C corporations, tax-exempt organizations, and other entities that don’t file Virginia individual or fiduciary returns are not eligible; their shares are excluded from the tax base, and they get no credit. The credit also cannot pass through from an estate or trust to its beneficiaries. Only the direct owner of the electing entity may claim it.³

How the Election Is Made

You make the election on Form 502PTET itself when you file. For tax years 2022 through 2026, the election must be made on a timely filed return, and the deadline is the return’s due date including any granted extensions.² The election applies for one taxable year only. There is no multi-year commitment; the decision is made fresh each year.

Because the election is tied to the filing deadline, an entity on extension has until the extended due date to decide. Estimated payments, however, are due during the year regardless, so most entities that plan to elect begin paying in well before the return is filed.

Completing the Tax Calculation

The form requires the entity’s federal EIN and its Virginia tax account number. An entity that has not previously registered with Virginia Tax must create a business account through the online portal before filing.

To compute the tax, start with Virginia taxable income under the rules in Section 58.1-391, then isolate the distributive shares attributable to eligible owners. Income attributable to nonresident eligible owners is limited to Virginia-source income.²

Before applying the rate, add back any federal deduction the entity took for state and local income taxes. Skipping that add-back is a common error that understates the liability. Multiply the adjusted eligible-owner income by 5.75 percent to get the gross tax.² Credits, deductions, and other adjustments allowed under Section 58.1-391 may reduce it. Subtract estimated payments made during the year to arrive at the balance due or overpayment.

Preparing Schedule VK-1 for Each Owner

Every owner of the entity receives a Schedule VK-1 reporting their share of income, deductions, credits, and, for eligible owners, the PTET credit amount. The VK-1 is where the owner gets the figure needed to claim the credit on their personal Virginia return.⁴

Each VK-1 reports:

The entity type code identifying the owner as a Virginia resident individual (RES), nonresident individual (NON), S corporation (SC), C corporation (CC), trust or estate (TE), or another type.
The participation type: general partner, limited partner, LLC or LLP member, S corporation shareholder, or other.
Ownership percentage. For S corporation shareholders this is the stock ownership percentage from federal Schedule K-1 (Form 1120-S); for partners it is the ending profit-share percentage from federal Schedule K-1 (Form 1065).
The date the ownership interest was acquired.
A withholding exemption code where applicable. Code 03, for example, applies when the owner is eligible to claim the PTET credit reported on the VK-1.

These fields are governed by the Form 502 instructions.³ Mismatches matter: if the credit shown on an owner’s VK-1 doesn’t match what the entity reported on Form 502PTET, Virginia Tax will flag the discrepancy on the owner’s individual return.

Filing Electronically

Virginia requires Form 502PTET to be filed electronically.⁵ There is no paper option. The entity or its authorized representative submits the completed return along with all associated Schedule VK-1 documents through Virginia Tax’s online business portal.

The portal validates entries as you upload and will reject a submission with formatting errors or missing required fields. Once accepted, the system generates a confirmation with a unique transaction number. Keep that confirmation; it serves as proof of filing date if a timeliness question arises later. After processing, Virginia Tax links the entity’s payment to the individual tax accounts of each eligible owner so the refundable credit becomes available on their returns.

Deadlines, Extensions, and Estimated Payments

Form 502PTET is due on the 15th day of the 4th month after the close of the entity’s taxable year. For calendar-year filers, that is April 15. If the date falls on a weekend or state holiday, the deadline shifts to the next business day.⁵

Virginia grants an automatic extension of time to file, but the extension does not extend the payment deadline. All tax owed is still due by April 15 regardless of whether the entity takes additional time to file the return.⁵

Beginning with tax year 2023, electing entities are required to make quarterly estimated payments. They are generally due on the 15th day of the 4th, 6th, and 9th months of the taxable year and the 1st month of the following taxable year. For calendar-year filers, that works out to April 15, June 15, September 15, and January 15. Estimated payments are made electronically through the same Virginia Tax online portal used for the return.

Underpaying estimated tax can trigger an addition to tax. Paying at least 100 percent of the prior year’s PTET liability by the quarterly deadlines is a common approach to stay in safe harbor, but the exact requirement should be confirmed against the form instructions for the applicable tax year.

Penalties and Interest

Virginia applies separate penalties depending on what went wrong:

Late filing penalty: 6 percent of the tax due per month or partial month the return is overdue, up to 30 percent.
Late payment penalty: 6 percent per month, capped at 30 percent of the unpaid tax.
Extension penalty: 2 percent per month on the balance due, up to 12 percent, when the entity files on extension but underpays by the original due date.

These penalties are assessed on top of each other when both apply.⁶ Interest also accrues on unpaid tax from the original due date at the federal underpayment rate under IRC Section 6621 plus 2 percentage points.⁷ Because the federal rate changes quarterly, the effective interest on late PTET payments shifts over time.

How Owners Claim the Credit

Each eligible owner claims a refundable credit on their Virginia individual return (Form 760 for residents, Form 763 for nonresidents) equal to their share of the PTET paid by the entity, using the amount shown on their Schedule VK-1. If the credit exceeds the owner’s Virginia income tax liability, the excess is refunded. It does not carry forward and does not expire.²

One required adjustment on the individual return: the owner must add back any deduction they claimed for state and local income taxes paid by the pass-through entity. Virginia’s statute requires the adjustment before the credit is applied, which prevents the owner from deducting the same tax twice.²

Availability for Tax Year 2026

The PTET was originally scheduled to sunset for tax years beginning on or after January 1, 2026. The 2025 General Assembly extended the sunset to January 1, 2027, through the eleventh enactment clause of the 2025 Appropriation Act (House Bill 1600, Chapter 725).⁸ The election remains available for tax year 2026. Entities planning to file for years beyond 2026 should confirm the current status of any further legislative action before relying on availability.

1
Virginia Code Commission. Virginia Code 58.1-390.1 – Definitions
2
Virginia Code Commission. Virginia Code 58.1-390.3 – Elective Income Tax on Pass-Through Entities
3
Virginia Department of Taxation. Instructions for Preparing 2025 Form 502
4
Virginia Department of Taxation. Virginia Form 502PTET Instruction Package
5
Virginia Tax. Pass-Through Entities
6
Virginia Tax. Penalties and Interest
7
Virginia Code Commission. Virginia Code 58.1-15 – Rate of Interest
8
Virginia Department of Taxation. 2025 Legislative Summary