PTET Passthrough Entity Tax Calculator 2026 (SALT Cap Workaround)
Estimate your 2026 state PTET tax paid at the entity level — and the federal income tax saved by bypassing the SALT cap. Models 14 PTET states, the post-OBBB temporary $40,000 SALT cap, and the refundable state credit on your personal return. Free, private, runs in your browser.
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OBBB Act 2025 SALT cap: The personal SALT cap rose from $10,000 to $40,000 (MFJ) for 2025–2029, with a phase-out beginning at $500k MAGI that reduces the cap back toward $10,000 at $600k MAGI. PTET still wins for high earners above the phase-out and for owners with large state tax bills, since PTET is deducted at the entity level — not capped at all.
Source: IRS Notice 2020-75, state PTET statutes (e.g. NY Tax Law §860, NJ BAIT P.L.2019 c.320), and OBBB Act 2025 (P.L. 119-21) §70120 SALT cap modifications. Last updated: May 3, 2026.
What Is PTET (Pass-Through Entity Tax)?
A Pass-Through Entity Tax (PTET) is a state-level income tax paid by an S corporation, partnership, or multi-member LLC at the entity level instead of being passed through to owners and paid at the personal level. PTET is the most popular state-level workaround to the federal $10,000 SALT cap that the Tax Cuts and Jobs Act of 2017 imposed on the deduction for state and local taxes. By paying state tax at the entity, the business deducts it federally as an ordinary trade-or-business expense — outside the SALT cap entirely. The owner then receives a refundable state credit on their personal return for the PTET already paid. As of 2026, 36 states plus New York City offer PTET regimes. Source: IRS Notice 2020-75.
The Treasury blessed this structure in November 2020 via Notice 2020-75, confirming that an entity-level state tax on partnership or S-corp income is deductible by the entity in computing federal taxable income — and is not treated as paid by the owners for SALT cap purposes. Every PTET state has since enacted a statute that mirrors this design.
How OBBB 2025 Changed the SALT Cap (and Why PTET Still Wins)
The One Big Beautiful Bill Act (P.L. 119-21, signed July 4, 2025) raised the personal SALT cap from $10,000 to $40,000 for tax years 2025 through 2029, with a phase-out that begins at $500,000 modified AGI and reduces the cap back to $10,000 by approximately $600,000 MAGI (MFJ). Single filers see the same dollar phase-out at half the income points. After 2029, the cap is scheduled to revert to $10,000 absent further action.
For pass-through owners with state tax bills above $40,000, or with MAGI above the phase-out range, PTET still produces a strictly larger federal deduction than the personal SALT cap. Owners with MAGI under $500k and total SALT under $40k may now be indifferent between PTET and personal-level SALT — though many state PTETs still help with administrative simplicity (single entity-level payment instead of personal estimated taxes). This calculator computes the post-OBBB cap based on your inputs and shows the federal tax saved by electing PTET versus relying on the personal cap.
State-by-State PTET Rates and Mechanics (2026)
PTET rates vary by state. New York City and New York State combine to exceed 14% for top earners, while Arizona is just 2.5% flat. Most states allow the owner to claim a refundable credit equal to their share of PTET paid against personal income tax on the same income — preserving net state revenue and avoiding double taxation. Connecticut is unusual: its PTET is mandatory and provides only a partial (87.5%) personal credit. Illinois, Massachusetts, Virginia, Colorado, and Arizona use a flat-rate PTET. New York, New Jersey, Maryland, Minnesota, and Oregon use graduated rates that match their personal income tax brackets.
Election timing matters. Most states require an annual election by the entity (typically March 15 for calendar-year filers) and many require quarterly estimated PTET payments. Failure to make timely estimated payments can void the federal deduction for that quarter under cash-method federal rules. Verify your state's deadline before electing — the IRS deduction follows actual entity payment, not accrual.
How to Use This Calculator
Enter your share of pass-through business income, the state where you'd elect PTET, your modified AGI (used to compute the post-OBBB SALT cap phase-out), your federal marginal rate, and other SALT items already on Schedule A (property tax + W-2 state withholding). The calculator computes (1) PTET owed at the entity level using the selected state's PTET rate, (2) the federal deduction saved versus the SALT cap given your AGI, (3) the federal tax savings at your marginal rate, and (4) the offsetting refundable state credit you claim on the personal return. Net effect is a federal tax cut equal to PTET × federal marginal rate, with no change to state tax owed. Last updated: May 3, 2026.
Frequently Asked Questions
What is PTET (Pass-Through Entity Tax) and how does it bypass the SALT cap?
PTET is a state income tax paid by an S corporation, partnership, or multi-member LLC at the entity level rather than passed through to owners. Because the entity pays the tax, the entity gets the federal deduction as an ordinary trade-or-business expense — outside the personal SALT cap entirely. IRS Notice 2020-75 (November 2020) blessed this structure. As of 2026, 36 states plus New York City offer a PTET election.
Did the OBBB 2025 SALT cap increase make PTET unnecessary?
No. The One Big Beautiful Bill Act raised the personal SALT cap from $10,000 to $40,000 for 2025–2029, but the cap phases back down to $10,000 between $500,000 and $600,000 MAGI (MFJ). High earners above the phase-out range still see a much larger federal deduction with PTET. Owners with state tax bills exceeding $40,000 also benefit, since PTET has no cap at all when paid at the entity.
How much can I save federally with PTET in 2026?
The federal saving equals the extra state tax that escapes the SALT cap multiplied by your federal marginal rate. For example, $50,000 of PTET on $500,000 of NY income at a 37% federal rate generates roughly $50,000 × 37% = $18,500 in federal tax savings, since none of that PTET counts against your personal SALT cap. The state tax owed does not change because most states grant a refundable credit equal to your share of PTET paid.
Which states have PTET as of 2026?
Roughly 36 states plus New York City: AL, AR, AZ, CA, CO, CT (mandatory), GA, HI, ID, IL, IN, IA, KS, KY, LA, MA, MD, MI, MN, MS, MO, MT, NE, NJ, NM, NY, NYC, NC, OH, OK, OR, RI, SC, UT, VA, WV, WI. States without a personal income tax (FL, TX, NV, WA, SD, WY, AK, TN, NH) generally do not need a PTET. Verify your state because adoption is ongoing.
Is PTET worth electing if I make under $500,000 of MAGI?
Possibly. Under the OBBB cap of $40,000 (MFJ) below the phase-out, you may already deduct most state tax personally — making PTET's federal benefit smaller. PTET still helps if your total SALT (state income + property tax + sales tax) exceeds $40,000, or if you prefer entity-level payment for cash-flow simplicity (single annual entity check vs four personal estimated payments). Run the numbers both ways before electing.
Are there any downsides to PTET?
Yes — three to watch. (1) Most PTET elections are annual and require state-specific timing (often March 15). Missing the deadline forfeits the deduction. (2) Quarterly estimated PTET payments are usually required; the federal deduction follows actual cash payment under IRS rules. (3) Some states (CT) offer only a partial personal credit (~87.5%), creating a small state-level cost. (4) PTET reduces ordinary income for federal QBI calculation, which may reduce the Section 199A deduction slightly. Coordinate with your CPA before electing.