PTE Pass-Through Entity Tax 2027 SALT Cap Workaround Calculator
Estimate the 2027 federal tax savings from electing your state's Pass-Through Entity Tax (PTET) to work around the SALT $40,000 cap.
What Is the PTE Tax Election?
The SALT $40,000 cap (raised from $10K under OBBB for 2026-2029) limits how much state and local tax individual taxpayers can deduct on Schedule A. Pass-Through Entity Tax (PTET) lets the entity (S corp, LLC, partnership) pay STATE income tax at the entity level — fully deductible to the entity for FEDERAL tax purposes (no individual cap applies). Owners then receive a state tax credit for the entity's payment. As of 2026, 36+ states offer PTET. Source: IRS Notice 2020-75, OBBB §70302. Last updated: May 2026.
Math: $500K K-1 in California
Without PTET: state tax of 9.3% × $500K = $46,500, but federal SALT deduction capped at $40K. Effective federal savings: $40K × 37% = $14,800. With PTET: entity deducts the full $46,500 federally, saving 37% × $46,500 = $17,205. Owner gets $46,500 state credit (no double-tax). Net federal savings: ~$2,400 per year per $500K of pass-through income — that's $24K over 10 years on this single layer.
Which States Have PTET?
Major states: CA (9.3%), NY (6.85-10.9% sliding), NJ (5.675-10.75%), CT (mandatory 6.99%), MA (5%), MD (8%), GA (5.75%), IL (4.95%), MN (9.85%), AZ (2.5%), NC (4.5%), VA (5.75%), SC (3%), and many more. NO PTET: AK, DE, FL, NV, NH, ND, SD, TN, TX, WA, WY (those without state income tax or that haven't passed PTET legislation). Always check current year — laws change frequently.
When PTET Doesn't Help
(1) States without income tax — nothing to deduct. (2) Owners below the SALT cap already — capped deduction not binding. (3) AMT-affected taxpayers may not benefit equally. (4) Some states with high-bracket residents in low-bracket entities. (5) C corp owners — PTET only applies to pass-through entities. Always model both scenarios for your specific state and entity.