SALT Cap vs. PTET Election: Which One Saves S-Corps More in 2026?

The One Big Beautiful Bill Act raised the SALT deduction cap from $10,000 to $40,000, climbing to $40,400 for 2026. If you own an S-Corp in a high-tax state, that sounds like good news. It also raises a question we’re hearing from almost every client this year: now that the cap is higher, should we still bother with the Pass-Through Entity Tax PTET election?

The short answer is usually yes—but it depends on your income, your state, and how the two options interact.

A Quick Refresher

The SALT cap limits how much state and local tax you can deduct on Schedule A personally. For 2026, that’s $40,400 for joint filers — but it phases down once your modified adjusted gross income passes $505,000, dropping 30 cents for every dollar over the threshold until it bottoms out at $10,000.

The PTET election works differently. Instead of you paying state income tax personally, your S-Corp pays it at the entity level. That payment is a fully deductible business expense, with no SALT cap and no itemizing required. More than 30 states offer this election, and the OBBBA left it fully intact—earlier drafts in Congress would have restricted it to service businesses, but that provision didn’t survive.

Why the Higher Cap Doesn’t Make PTET Obsolete

A $40,400 cap covers a lot of owners. But three things keep PTET relevant anyway:

The phase-down hits high earners hard. Above a $505,000 MAGI, your SALT cap shrinks fast, eventually returning to $10,000—exactly the problem PTET solves.

It can help even when the cap doesn’t bind. Because the entity-level tax is deducted before income passes through to you, it can also affect your QBI calculation favorably for some owners.

The cap is temporary; PTET isn’t. The $40,400 cap reverts to a flat $10,000 in 2030. PTET gives you a planning tool that doesn’t depend on what Congress does next.

When to Run the Numbers

Take a serious look at PTET if you’re above the $505,000 MAGI threshold, live in a high-tax state, typically don’t itemize anyway, or have multiple owners with different income levels—since the benefit doesn’t always land evenly across shareholders. If your state tax bill comfortably fits under $40,400 and your income is well below the phase-out range, claiming SALT directly may be simpler and yield a similar result.

This Isn’t a Rule-of-Thumb Decision

PTET elections happen at the entity level, but the benefit varies by owner, by state, and by how much credit your state actually gives for tax paid. It takes real modeling, not a guess, to know which path wins for your specific numbers.

We work exclusively with S-Corp owners and run this analysis every year as rules change. Schedule a consultation, and we’ll tell you which approach puts more money back in your pocket.