Pass-Through Entity Tax (PTET) Analyzer 2026

The PTET election lets a partnership or S-corp pay state tax at the entity level — fully federally deductible, bypassing the §164(b)(6) $40,000 SALT cap. Available in 36+ states. Net benefit is reduced dollar-for-dollar by the §199A QBI haircut.

Guidance, not advice. This calculator runs the rules as published, it doesn't assess your circumstances. Your actual tax may be affected by factors it doesn't cover (deductions, credits, filing status nuances, state-specific adjustments). Always seek financial or tax advice from a qualified CPA, Enrolled Agent, or tax attorney, or contact the IRS. Read our editorial scope →

36+ states with elective PTET

The Pass-Through Entity Tax (PTET) is the principal federal SALT-cap workaround for owners of partnerships and S-corporations: the entity pays state tax federally deductible at the entity level, and the owner gets a state credit or income exclusion.

Your situation

PTET applies to owner's share of qualifying entity income. Federal benefit is netted against the §199A QBI haircut (dollar-for-dollar reduction).

State

Filing status

Owner's share of entity ordinary income (qualifying)

Other taxable income (for marginal-rate estimate)

SALT otherwise claimed on Schedule A (pre-PTET)

PTET replaces Schedule-A SALT for the entity portion — capped at $40,000 (TY 2026, $20,000 MFS).

Federal net benefit

California PTET: 9.30% — your marginal federal rate is 32%.

PTET paid by entity

$46,500

Federal deduction benefit (gross)

+$14,880

QBI haircut (−20% × marg)

−$2,976

Schedule-A SALT already available

−$12,800

Net federal benefit (after QBI & SALT offsets)

-$896

QBI reduction is the catch

PTET reduces §199A QBI dollar-for-dollar at the partner/shareholder level. For taxpayers below the SSTB phase-out, the net benefit is roughly federal-rate × PTET × (1 − 0.20) minus any SALT they already get on Schedule A.

SALT-cap context (TY 2026)

The §164(b)(6) SALT cap is $40,000 for 2025–2029 (OBBBA expansion from $10k) and reverts to $10,000 in 2030. PTET bypasses the cap because the deduction is taken at the ENTITY level — never on the individual's Schedule A.

Federal deduction is taken at the ENTITY level (Form 1065/1120-S), bypassing the §164(b)(6) $40,000 SALT cap.

QBI haircut: the PTET payment reduces §199A qualified business income dollar-for-dollar (Notice 2020-75 + later guidance), so the 20% QBI deduction shrinks.

Owner receives a CA resident credit (or income exclusion) for their share of the PTET — no state-level double-taxation.

CA: Flat 9.3% on qualified net income. Election available through 2025; sunset extension pending.

TaxKiln framework

State PTET Net-Benefit Grid

TaxKiln's per-state framework for the elective Pass-Through Entity Tax (PTET) SALT-cap workaround: state-rate lookup (flat vs progressive), entity-level federal deduction under Notice 2020-75, §199A QBI dollar-for-dollar reduction, owner resident-credit/exclusion mechanics, and Schedule-A SALT offset — netted into a single federal-benefit figure for TY 2026.

Tax year 2026 · USD · OBBBA permanent law

Formula: Net federal benefit ≈ (PTET × marginal rate) − (PTET × 20% QBI × marginal rate) − min(SALT, $40k) × marginal rate.

Assumptions

Entity income is fully PTET-qualifying (no guaranteed payments or service-business carve-outs applied).
Marginal federal rate evaluated at otherTaxableIncome + entityIncome on ordinary brackets.
QBI haircut applied at the §199A 20% rate without W-2/UBIA or SSTB phase-out logic.
State PTET rate uses the headline statutory rate from each state's enabling Act; some states (NJ, NY, OR) are progressive — top rate shown.
Owner is assumed to be a state resident receiving a full credit/exclusion; non-resident credit limits not modeled.

Estimates only — not tax advice. Brackets, deductions and thresholds reflect the locked 2026 federal configuration. State amounts use each state's posted 2026 top-line rules and may differ from a full state-form computation. Always confirm complex situations with a qualified CPA, EA, or tax attorney.