PTET Elections: Still Worth It with the Higher SALT Cap?
By Cody Heimerdinger
Many pass-through business owners have used the Pass-Through Entity Tax (PTET) election to reduce federal taxable income by shifting certain state income taxes to the entity level, where they may be deductible as a business expense. With the SALT deduction cap increased from $10,000 to $40,000, the natural question is: Do PTET elections still make sense?
In many cases, yes, but it depends.
Why PTET can still work
Even with a higher SALT cap, many owners continue to lose deductions because:
- State income taxes often exceed $40,000, especially for high earners.
- The $40,000 cap may phase out at higher income levels, putting some taxpayers right back into SALT limitation territory.
A PTET election may allow the state tax to be deducted before income passes through to the owner, potentially preserving a federal deduction that would otherwise be capped (or unavailable if the taxpayer doesn’t itemize).
Key items to review before electing PTET
PTET is not “one-size-fits-all.” The decision should consider:
- State-specific rules (rates, credits, addbacks, election deadlines)
- Owner mix (resident vs. nonresident, individuals vs. entities)
- Cash flow (entity estimates and payment timing)
- Administrative complexity
Bottom Line:
The SALT cap increase changes the analysis, but it doesn’t eliminate the opportunity. PTET remains a valuable planning tool for many pass-through owners, especially where state taxes are significant.
If you own (or are considering) a partnership or S corporation, we can run a quick projection to determine whether PTET is beneficial for your specific situation.