Should You Revisit Your PTET Election After the SALT Cap Increase?

The increase in the state and local tax (SALT) deduction cap changed the planning landscape for many taxpayers. For pass-through business owners, however, the more important question entering 2026 is not whether the rules changed, but whether their existing tax strategy still holds. 

The expanded SALT cap altered the math for some taxpayers. It did not eliminate the need for thoughtful evaluation, particularly where entity-level elections and multi-state considerations are involved. 

Key Takeaways 

• The expanded SALT cap does not replace the role of pass-through entity tax (PTET) for many business owners 

• SALT deductions and PTET operate at different levels and address different constraints 

• Higher SALT limits increase the importance of comparison, not simplification 

• Multistate and higher-income owners often continue to benefit from PTET elections 

• Annual reassessment of PTET is now a best practice, not an exception 

The SALT Increase Changed the Math, Not the Framework 

The expanded SALT cap provides additional relief for taxpayers who itemize and remain below income-based phaseouts. That relief is realized at the individual level and remains sensitive to income variability, timing, and expiration. 

PTET elections operate differently. When state taxes are paid at the entity level, they remain fully deductible for federal purposes and do not count toward the SALT cap. That distinction continues to matter even with a higher individual deduction limit. 

Why PTET Still Warrants Reassessment 

PTET payments continue to reduce federal taxable income at the entity level before income flows through to owners. For many pass-through businesses, especially those with multistate operations, this structure can produce more consistent outcomes than relying on individual itemized deductions alone. 

The planning question for 2026 is not whether PTET is still permissible, but whether it continues to align with the broader tax profile of the business and its owners. That includes income levels, state exposure, filing methods, and cash flow considerations. 

Scenarios Where PTET Often Remains Advantageous 

Continuing a PTET election may still make sense when: 

• Income exceeds or fluctuates around SALT phaseout thresholds 

• The business operates in multiple states 

• Entity-level deductions provide more predictable federal tax outcomes 

• Centralized tax payments support cash flow planning 

• The entity is structured as an S corporation, partnership, or LLC taxed as such 

In these situations, PTET functions as a structural planning tool rather than a temporary workaround. 

When the SALT Expansion May Shift the Analysis 

There are also circumstances where PTET should be reconsidered: 

• Income is consistently below phaseout levels and the expanded SALT cap is fully usable 

• PTET introduces administrative complexity without meaningful offsetting benefit 

• State-specific PTET rules create unfavorable outcomes 

• Nonresident income is minimal and composite filing remains straightforward 

The SALT expansion increased the number of viable strategies. It did not create a universal answer. 

A New Best Practice: Annual PTET Review 

One of the most important planning shifts following the SALT cap increase is procedural rather than technical. 

PTET elections should no longer be treated as static. Changes in income, ownership, state exposure, or deduction availability can materially affect outcomes. What was optimal before the SALT increase may still be appropriate, but that conclusion should be reached through analysis rather than assumption. 

Frequently Asked Questions (FAQs) 

Does the higher SALT cap make PTET unnecessary? 

No. PTET deductions occur at the entity level and are not subject to SALT limits or phaseouts. 

If I elected PTET in prior years, should I reverse it now? 

Not automatically. The decision depends on income levels, state exposure, and alternative filing methods. 

How do multistate businesses factor into this decision? 

Multistate operations often face higher effective rates and added complexity through composite filings, which can make PTET relevant even with an expanded SALT cap. 

Should PTET elections be reviewed annually? 

Yes. Annual reassessment is now considered a best practice given changing income levels and planning dynamics. 

Is PTET always better than relying on SALT deductions? 

No. The optimal approach depends on how income, deductions, and compliance interact in a given year. 

Final Perspective 

The SALT expansion changed what is possible, but it did not simplify planning. 

For pass-through business owners, the most valuable step entering 2026 is not choosing between SALT and PTET, but revisiting how each fits into a broader tax and cash flow strategy. That evaluation is where stronger decisions and more effective advisory outcomes begin.