Did the OBBB Act kill the PTET workaround?

No. The House draft of the One Big Beautiful Bill Act (2025) contained a provision to restrict PTET benefits for specified service trades or businesses (SSTBs). That restriction was dropped in the final Senate text and did not become law under P.L. 119-21 signed July 4, 2025. As of July 2026, all 30+ state PTET regimes remain fully usable.

Does electing PTET reduce my §199A QBI deduction?

Often. The state tax paid at the entity level reduces the qualified business income that flows through to owners dollar for dollar, so the 20% QBI deduction falls by up to 20 cents per dollar of PTET. An owner taking the full 20% deduction loses the full 20 cents; an owner whose deduction is already capped by the business's W-2 wages and property loses less, or nothing. Net-of-QBI, PTET recovers roughly 80% or more of the federal deduction (marginal rate × 0.80 when the full clawback applies). This calculator shows the clawback as an explicit line item and figures it from the business's wages and property when you enter them.

Do I need to itemize to benefit from PTET?

No — that's the point. PTET is a business expense at the entity level, so it reduces the K-1 income flowing to your Form 1040 whether or not you itemize on Schedule A. Personal state income tax helps only if itemizing beats your standard deduction, and then only by the excess; the entity-level deduction helps either way. The net benefit is smaller if PTET also reduces your §199A QBI deduction (up to 20¢ per $1 of PTET): at this calculator's starting inputs, a non-itemizer keeps $12,600 of a $15,750 gross benefit.

Who benefits most from PTET in 2026?

High earners in the SALT cap phase-down zone (MAGI above ~$505,000) benefit most, because their personal cap shrinks toward $10,000 while PTET stays uncapped. Standard-deduction takers benefit because PTET works without Schedule A. AMT payers benefit because the PTET business deduction is AMT-proof.

When is the PTET election deadline?

Election mechanics and deadlines vary by state, and several states require a MID-YEAR election rather than by the return due date. In some states a missed election date bars the election for that year. California is different for 2026–2030: a missed or short June 15 payment still allows the election, but each owner's credit is cut by 12.5% of their share of the unpaid June 15 amount. Check your state's specific deadline now; some states also require quarterly estimated PTET payments starting mid-year.

What if I own interests in multiple states?

Nonresident and multi-state owners need entity-level analysis. Some states give residents a credit for PTET paid to other states; others treat it as a deduction or don't recognize it at all. This estimator assumes a single-state owner-resident election — for multi-state facts, work with a CPA before electing.

Pass-Through Entity Tax · IRC §164 / IRS Notice 2020-75 · P.L. 119-21

PTET Decision Calculator (2026)

Should you elect the Pass-Through Entity Tax? Model the federal benefit of PTET against the personal SALT cap phase-down — with the §199A QBI clawback shown explicitly. Educational estimate only; confirm election with a CPA.

Tax Year

Inflation-adjusted

Reuses shared SALT constants

Updated August 24, 2026Reviewed for 2025 & 2026 tax years

Is a Pass-Through Entity Tax (PTET) election still worth it in 2026?

For this profile — Married Filing Jointly, $500,000 of pass-through income at a 9.0% state rate, MAGI $600,000 without the election — PTET produces an estimated federal benefit of $12,600 vs $0 without the election, a net advantage of $12,600. Your personal SALT cap is $11,900 (phased down from the $40,400 base), rising to $25,400 with PTET because the election lowers your MAGI.

OBBB (P.L. 119-21) left PTET untouched — the House-draft SSTB restriction was dropped in the Senate.
Entity-level state tax is a fully deductible business expense (IRS Notice 2020-75) — not subject to the personal SALT cap.
PTET works with the standard deduction; no need to itemize.
QBI-eligible owners can lose up to ~20% of the benefit to the §199A clawback — nothing when the deduction is already capped by W-2 wages/UBIA.
The personal SALT cap phases down 30¢ per $1 of MAGI above the threshold, floored at $10,000 — high earners benefit MOST from PTET.

Source:IRS Notice 2020-75 · P.L. 119-21

Owner & entity inputs

Filing status

Pass-through income (K-1 / S-corp / partnership)

Effective state income-tax rate on this income (%)

Other personal SALT paid (property tax + non-PT state withholding)

Household MAGI without a PTET election

Other itemized deductions (not SALT)

QBI-eligible business?

Turn off if you take no §199A deduction on this income.

I know the business's W-2 wages and property

Not sure? The calculator charges the full 20% clawback — the conservative case, which assumes the W-2 wage/property limit doesn't cap your deduction.

Honest caveats (read before electing)

State mechanics vary. Most states give owners a CREDIT for entity tax paid; a few use a deduction or exclusion. This calculator assumes the standard credit model.
Election deadlines vary — and several are mid-year. In some states a missed election date bars the election for that year. California is different for 2026–2030: a missed or short June 15 payment still allows the election, but each owner's credit is cut by 12.5% of their share of the unpaid June 15 amount. Check your state's PTET program page NOW.
Multi-state and nonresident owners need entity-level analysis. Residency, apportionment, and out-of-state credits all interact.
Marginal rate is an estimate. Derived from MAGI minus the standard deduction; your real return will reflect itemized deductions, credits, and phase-outs.
Educational only. Confirm with a CPA before making the election — it's typically irrevocable for the year.

Net PTET advantage (2026)

+$12,600

PTET wins for this profile

Marginal federal rate (est.)35%

Standard deduction$32,200

Base SALT cap$40,400

Applicable SALT cap (after phase-down)$11,900

Phased down by $28,500 (OBBBA §70120 30¢/$1 above threshold).

Applicable SALT cap with PTET$25,400

Higher with PTET: the entity tax lowers your MAGI to $555,000.

Without PTET

State tax on pass-through$45,000

Total SALT paid$60,000

SALT allowed under the cap$11,900

Itemizing beats the standard deduction?No

Federal benefit$0

With PTET

Entity tax paid$45,000

Gross federal benefit$15,750

QBI clawback−$3,150

Net entity benefit$12,600

Itemizing beats the standard deduction? (with PTET)No

Federal benefit$12,600

QBI clawback nuance: PTET reduces the QBI flowing to owners, so the §199A 20% deduction shrinks by up to 20¢ per $1 of PTET — less, or nothing, when the business's W-2 wages or property already cap it, and a specified service business inside the phase-in range can even gain. Without the business's wage and property figures, this estimate charges the full 20¢ (you keep ~80% of the gross federal benefit). Most competitor calculators miss this line.

Want the full story on why PTET survived OBBB and how the 2026 phase-down changes the math? See the 2026 PTET SALT Workaround Guide.

How this calculator works

Step 1 — Applicable SALT cap. Start from the year-aware base cap ($40,400) and apply the OBBBA §70120 phase-down: 30¢ per $1 of MAGI above the threshold, floored at $10,000. Married filing separately: half the threshold, and the cap is half of the reduced full cap (15¢ per $1, floor $5,000).

Step 2 — Marginal federal rate. Estimated from MAGI minus the standard deduction using the shared 2025/2026 brackets. Labelled as an estimate — your return will reflect actual itemized deductions and credits.

Step 3 — Without PTET. State tax on pass-through + other SALT is limited to the cap and added to your other itemized deductions. It counts only if itemizing beats your standard deduction, and only by the amount it beats it; that extra deduction is multiplied by the marginal rate.

Step 4 — With PTET. Entity tax is a fully deductible business expense (no cap, no itemizing requirement). If QBI-eligible, subtract the §199A clawback: the full 20% by default, or the deduction actually lost once you enter the business's W-2 wages and property. Your remaining personal SALT is capped again, on your lower with-PTET MAGI (which can restore cap room lost to the phase-down), and adds a benefit only if itemizing still beats your standard deduction.

Step 5 — Verdict. Net advantage > $500 favors PTET; < $500 favors skipping; in-between is a close call worth a CPA conversation.

Frequently asked questions

Did the OBBB Act kill the PTET workaround?: No. The House draft of the One Big Beautiful Bill Act (2025) contained a provision to restrict PTET benefits for specified service trades or businesses (SSTBs). That restriction was dropped in the final Senate text and did not become law under P.L. 119-21 signed July 4, 2025. As of July 2026, all 30+ state PTET regimes remain fully usable.
Does electing PTET reduce my §199A QBI deduction?: Often. The state tax paid at the entity level reduces the qualified business income that flows through to owners dollar for dollar, so the 20% QBI deduction falls by up to 20 cents per dollar of PTET. An owner taking the full 20% deduction loses the full 20 cents; an owner whose deduction is already capped by the business's W-2 wages and property loses less, or nothing. Net-of-QBI, PTET recovers roughly 80% or more of the federal deduction (marginal rate × 0.80 when the full clawback applies). This calculator shows the clawback as an explicit line item and figures it from the business's wages and property when you enter them.
Do I need to itemize to benefit from PTET?: No — that's the point. PTET is a business expense at the entity level, so it reduces the K-1 income flowing to your Form 1040 whether or not you itemize on Schedule A. Personal state income tax helps only if itemizing beats your standard deduction, and then only by the excess; the entity-level deduction helps either way. The net benefit is smaller if PTET also reduces your §199A QBI deduction (up to 20¢ per $1 of PTET): at this calculator's starting inputs, a non-itemizer keeps $12,600 of a $15,750 gross benefit.
Who benefits most from PTET in 2026?: High earners in the SALT cap phase-down zone (MAGI above ~$505,000) benefit most, because their personal cap shrinks toward $10,000 while PTET stays uncapped. Standard-deduction takers benefit because PTET works without Schedule A. AMT payers benefit because the PTET business deduction is AMT-proof.
When is the PTET election deadline?: Election mechanics and deadlines vary by state, and several states require a MID-YEAR election rather than by the return due date. In some states a missed election date bars the election for that year. California is different for 2026–2030: a missed or short June 15 payment still allows the election, but each owner's credit is cut by 12.5% of their share of the unpaid June 15 amount. Check your state's specific deadline now; some states also require quarterly estimated PTET payments starting mid-year.
What if I own interests in multiple states?: Nonresident and multi-state owners need entity-level analysis. Some states give residents a credit for PTET paid to other states; others treat it as a deduction or don't recognize it at all. This estimator assumes a single-state owner-resident election — for multi-state facts, work with a CPA before electing.

Sources & References

Primary references used for this content

IRS Notice 2020-75

Deductibility of Payments by Partnerships and S Corporations for Certain State and Local Income Taxes

The IRS blessing that launched the PTET workaround

View on irs.gov

P.L. 119-21 (OBBB)

One Big Beautiful Bill Act

SALT cap $40k/$40.4k + phase-down; House SSTB restriction on PTET dropped

View on congress.gov

Rev. Proc. 2025-32

2026 Tax Inflation Adjustments (incl. §70120 phase-down)

Base SALT cap and thresholds indexed for 2026

View on irs.gov

IRC §164

Taxes — SALT limitation and the entity-level election

Statutory basis for the SALT cap that PTET works around

View on law.cornell.edu

✓4 primary sources; links re-checked on a weekly rotation by the source watcher

Disclaimer: This calculator provides estimates for educational purposes only. Not tax, legal, or financial advice. Results may vary based on your specific circumstances. Consult a qualified CPA or tax professional for personalized guidance.