Quick answer
PTET moves qualifying state income tax from the owner level to the entity level. IRS Notice 2020-75 treats qualifying entity payments as deductible in computing the partnership’s or S corporation’s federal income, rather than as the owner’s capped personal SALT deduction. State law determines the election, tax base, rate, payment timing, and owner credit.
How the PTET deduction works
- 1
The entity confirms eligibility and elects under state law
Partnerships and S corporations are common eligible entities, but owner and entity restrictions differ.
- 2
The entity calculates and pays the state tax
The state defines the tax base, apportionment, rate, estimates, and payment deadline.
- 3
The entity deducts the qualifying payment federally
Notice 2020-75 says the payment is taken into account in computing the entity’s non-separately stated taxable income or loss.
- 4
The owner receives state-level relief
The state may provide a refundable or nonrefundable credit, carryforward, subtraction, or exclusion.
- 5
The preparer reconciles the federal and state effects
PTET can reduce federal pass-through income and QBI while producing state addbacks, credits, and owner-basis consequences.
The 2026 SALT cap changed the break-even point
For 2026, the personal SALT deduction cap is scheduled to be $40,400 for most filers and $20,200 for married filing separately. The higher amount begins to phase down when modified adjusted gross income exceeds $505,000, with a statutory floor of $10,000, and the temporary regime is scheduled to return to a $10,000 cap in 2030.
PTET is not automatically valuable just because it is available. An owner who already fits all personal taxes under the cap may get little federal benefit, while still bearing extra return, estimate, and cash-flow work. High-income owners can still benefit when the phaseout pushes their usable personal cap down.
Which states offer PTET?
The AICPA’s April 14, 2026 map is a useful national starting point, but a map cannot carry the election. Programs differ on tax years, eligible owners, rates, deadlines, estimates, revocability, and whether owners receive a credit, exclusion, or deduction.
The tracker below links each published row to state authority and records its verification date. Use it to screen the regime, then open the filing-year election, estimated-payment, entity-return, and owner-relief instructions before acting.
Open the AICPA state PTE map2026 state PTET election tracker
Compare enacted current or new PTET regimes for 2026 and 2027, plus recently expired programs. Every published row links to current official guidance; jurisdictions outside that scope are omitted, and the data is screening material rather than a substitute for filing-year instructions.
Alabama
ActiveVerified 2026-08-30
Rate and base
5% of Alabama taxable income
Eligible entities
Partnerships, S corporations
Election
With the timely Form 65 or Form 20S, including extensions · Electing entity return; more than 50% voting-owner consent · Annual election
Owner relief
Refundable credit equal to the owner share of Alabama PTET paid · Credit · 100% refundable
State notes and primary sources
Covered tax years: 2026 and 2027
Estimated payments: Required when expected liability exceeds $500; generally April 15, June 15, September 15, and December 15.
The entity-level return is generally due March 15 for a calendar-year entity. The election is made separately for each year.
Arizona
ActiveVerified 2026-08-30
Rate and base
2.5% for 2026
Eligible entities
Partnerships, S corporations
Election
With the timely original Form 165 or Form 120S, including extensions · Eligible owners opt in through the entity return · Annual election
Owner relief
Credit allocated to participating owners · Credit
State notes and primary sources
Covered tax years: 2026 and 2027
The election applies only to eligible owners who opt in. Confirm credit use and any refund treatment on the current owner instructions.
Filing-year confirmation: Current primary guidance verified the election and rate, but not a single unqualified statement that every excess owner credit is refundable.
Arkansas
ActiveVerified 2026-08-30
Rate and base
Highest Arkansas individual income-tax rate for the year; confirm the filing-year rate
Eligible entities
Partnerships, S corporations, LLCs taxed as either
Election
Generally by April 15 of the tax year · Form AR362, ATAP, or the entity return under current DFA procedures · Annual election
Owner relief
Owner credit under the Arkansas elective PTET rules · Credit
State notes and primary sources
Covered tax years: 2026 and 2027
Arkansas guidance and regulations should be checked for the applicable rate, election path, and owner-credit limitations for the filing year.
Filing-year confirmation: The 2026/2027 rate and detailed owner-credit mechanics were not stated on one current primary-authority page.
California
ActiveVerified 2026-08-30
Rate and base
9.3% of qualified net income
Eligible entities
Partnerships, S corporations, Eligible LLCs taxed as either
Election
Timely original return, including extensions · Election and allocation reported with FTB 3804 · Annual election
Owner relief
Nonrefundable qualified-owner credit · Credit · Five-year carryforward
State notes and primary sources
Covered tax years: 2026 and 2027
Estimated payments: For 2026 to 2030, the June 15 payment is generally $1,000 or 50% of prior-year elective tax, whichever is greater; the balance is due with the original return.
The program runs through 2030. A short June payment no longer automatically invalidates the election, but can reduce affected owner credits under the current statutory formula.
Colorado
ActiveVerified 2026-08-30
Rate and base
4.4% of the elective entity tax base
Eligible entities
Partnerships, S corporations
Election
With Form DR 1705 or the timely DR 0106 under current instructions · State election form or entity return · Annual election
Owner relief
Refundable owner credit · Credit · 100% refundable
State notes and primary sources
Covered tax years: 2026 and 2027
Estimated payments: Required when expected net liability is more than $5,000.
The election is irrevocable for the elected year. Verify the current return and payment instructions before filing.
Connecticut
ActiveVerified 2026-08-30
Rate and base
See the filing-year Form CT-PET instructions for the applicable computation
Eligible entities
Partnerships, S corporations
Election
With the timely CT-1065/CT-1120SI, including extensions · Return checkbox or other written election prescribed by DRS · Annual election
Owner relief
Owner credit under Connecticut PET rules · Credit
State notes and primary sources
Covered tax years: 2026 and 2027
Estimated payments: Generally required at $1,000 or more; calendar-year installments April 15, June 15, September 15, and January 15.
The elective regime replaced the former mandatory entity tax. Confirm the current tax-base calculation and credit percentage in the filing-year package.
Filing-year confirmation: The current overview did not consolidate the rate/base and owner-credit percentage; those figures require the filing-year CT-PET instructions.
Georgia
ActiveVerified 2026-08-30
Rate and base
5.19% under current Georgia PTET guidance
Eligible entities
Partnerships, S corporations
Election
Follow the filing-year entity-return election procedure · Election on the applicable Georgia entity return · Annual election
Owner relief
Owners exclude their distributive share of income taxed at the entity level, subject to Georgia rules · Exclusion
State notes and primary sources
Covered tax years: 2026 and 2027
Estimated-payment and owner-level adjustment mechanics should be checked against the current return instructions.
Filing-year confirmation: Current official materials confirm the regime and rate, but election mechanics are spread across the return instructions and regulations.
Hawaii
ActiveVerified 2026-08-30
Rate and base
See the current Hawaii PTE election and return instructions
Eligible entities
Partnerships, S corporations
Election
Follow the filing-year election procedure published by the Department of Taxation · Hawaii elective PTE filing · Annual election
Owner relief
Owner credit, with a required income adjustment under post-2024 law · Credit
State notes and primary sources
Covered tax years: 2026 and 2027
Act 58, SLH 2025 changed the owner adjustment for tax years after 2024. Confirm the rate, filing form, and credit limitation for 2026/2027.
Filing-year confirmation: The current program page did not present every 2026/2027 filing parameter in a consolidated form.
Idaho
ActiveVerified 2026-08-30
Rate and base
Idaho corporate income-tax rate for the filing year
Eligible entities
Partnerships, S corporations
Election
Any original return; after July 1, 2026, an amended change is permitted before the original due date · Affected business entity election on the Idaho return · Annual election
Owner relief
Owner credit equal to the Idaho tax paid on the owner share · Credit · Full credit
State notes and primary sources
Covered tax years: 2026 and 2027
Payment is generally due on the 15th day of the fourth month after year-end. Idaho changed election timing effective July 1, 2026.
Illinois
ActiveVerified 2026-08-30
Rate and base
4.95% of net income
Eligible entities
Partnerships other than publicly traded partnerships, S corporations
Election
On the timely IL-1065 or IL-1120-ST, including extensions · Election on the entity return · Annual election
Owner relief
Owner credit for the distributive share of PTET paid · Credit
State notes and primary sources
Covered tax years: 2026 and 2027
Estimated payments: Required when expected liability exceeds $500; installments generally in months 4, 6, 9, and 12.
The election is permanent in Illinois law and irrevocable after the extended return due date. Separate partnership-base rules apply for tax years ending on or after December 31, 2026.
Indiana
ActiveVerified 2026-08-30
Rate and base
2.95% for 2026; 2.90% for 2027
Eligible entities
Partnerships, S corporations, LLCs taxed as either
Election
During the tax year or with a timely original return, including extensions · Indiana PTET election; not available after the original return is filed · Annual election
Owner relief
Owner credit for the owner share of Indiana PTET · Credit
State notes and primary sources
Covered tax years: 2026 and 2027
Estimated payments: Calendar-year installments generally due April 20, June 20, September 20, and December 20.
County income tax is not part of the entity-level PTET computation.
Iowa
ExpiredVerified 2026-08-30
Rate and base
No elective PTET for 2026 or 2027 under current law
Eligible entities
Formerly eligible partnerships and S corporations
Election
Program ended after tax year 2025 · No 2026/2027 election available
Owner relief
No 2026/2027 PTET owner credit · Unavailable
State notes and primary sources
Covered tax years: 2022 through 2025 only
Iowa’s elective PTET applied only to tax years beginning on or after January 1, 2022 and before January 1, 2026.
Kansas
ActiveVerified 2026-08-30
Rate and base
Highest Kansas individual income-tax rate for the filing year
Eligible entities
Partnerships, S corporations
Election
With the timely Form K-120S · Election on Form K-120S · Annual election
Owner relief
Credit for eligible individual and trust owners; special trust limitations apply · Credit
State notes and primary sources
Covered tax years: 2026 and 2027
The election is irrevocable for the year. A trust generally may not pass its PTET credit through to beneficiaries. Confirm the current top rate and estimated-payment rules.
Filing-year confirmation: The precise 2026/2027 top individual rate should be refreshed from the filing-year Kansas instructions.
Kentucky
ActiveVerified 2026-08-30
Rate and base
Kentucky individual income-tax rate for the filing year
Eligible entities
Partnerships, S corporations, Other qualifying pass-through entities
Election
With timely Form 740-PTET under the filing-year instructions · Entity election binding on all owners · Annual election
Owner relief
Refundable individual-owner credit · Credit · Refundable for qualifying individual owners
State notes and primary sources
Covered tax years: 2026 and 2027
Entity and owner eligibility should be confirmed in the current Form 740-PTET package.
Louisiana
ActiveVerified 2026-08-30
Rate and base
3% for tax periods beginning on or after January 1, 2025
Eligible entities
S corporations, Other qualifying pass-through entities
Election
Before or during the year, generally by the 15th day of the fourth month after year-end · Form R-6980; effective only after Department acceptance
Owner relief
Owner income exclusion rather than a dollar-for-dollar credit · Exclusion
State notes and primary sources
Covered tax years: 2026 and 2027
The election continues until terminated. A terminated election generally triggers a five-year re-election bar.
Maine
NewVerified 2026-08-30
Rate and base
7.15% under the enacted 2026 elective PTET law
Eligible entities
Partnerships, S corporations, Other eligible pass-through entities under enacted law
Election
By the filing deadline, including extensions · Annual election under forms and procedures to be issued by Maine Revenue Services · Annual election
Owner relief
Refundable credit equal to 90% of the owner share of PTET · Credit · 90% refundable
State notes and primary sources
Covered tax years: 2026 and 2027
Effective July 29, 2026. Forms and operational guidance were still emerging at review. The law also addresses an additional estimated amount for certain nonresident members.
Filing-year confirmation: Implementation forms and administrative deadlines were not yet complete when reviewed; recheck Maine guidance before filing.
Maryland
ActiveVerified 2026-08-30
Rate and base
2026: 8.75% for individual/fiduciary members; 8.25% for entity members
Eligible entities
Partnerships, S corporations, LLCs taxed as pass-through entities
Election
Made with the first PTET filing or payment for the year · Election through the applicable Maryland filing or payment · Annual election
Owner relief
Owner credit subject to Maryland member and sourcing rules · Credit
State notes and primary sources
Covered tax years: 2026 and 2027
The 2026 tax base remains Maryland-source based under enacted budget legislation. The owner credit may not offset every separate owner-level item, including the additional tax on certain net capital gain.
Filing-year confirmation: The 2027 computation remains subject to later legislation and filing-year guidance.
Massachusetts
ActiveVerified 2026-08-30
Rate and base
5% under Chapter 63D; an additional 4% election under Chapter 63E may apply above the surtax threshold
Eligible entities
Partnerships, S corporations, Eligible pass-through entities
Election
With a timely original return, including extensions · Separate annual elections under the applicable chapter · Annual election
Owner relief
Refundable owner credit equal to 90% of the allocated excise · Credit · 90% refundable
State notes and primary sources
Covered tax years: 2026 and 2027
Estimated payments: Generally required when expected excise is $400 or more; calendar-year dates April 15, June 15, September 15, and January 15.
Beginning in 2026, Massachusetts has a 5% Chapter 63D election and a separate Chapter 63E election tied to the 4% surtax. DOR provided transitional 2026 estimated-payment relief for the new Chapter 63E regime.
Michigan
ActiveVerified 2026-08-30
Rate and base
4.25% for 2026
Eligible entities
Partnerships, S corporations, Other qualifying flow-through entities
Election
Generally the last day of the ninth month of the tax year (September 30 for calendar-year entities) · Election through Michigan Treasury Online
Owner relief
Owner credit for the allocated Michigan flow-through entity tax · Credit
State notes and primary sources
Covered tax years: 2026 and 2027
The election is irrevocable for three tax years. The regime remains available while the federal Section 164(b)(6)(B) limitation remains in effect.
Minnesota
ActiveVerified 2026-08-30
Rate and base
9.85% of the elective PTE tax base
Eligible entities
Partnerships, S corporations, Eligible LLCs taxed as either
Election
By the extended return due date (September 15 for a calendar-year entity) · Election on the entity return; more than 50% qualifying-owner control required · Annual election
Owner relief
Fully refundable owner credit · Credit · 100% refundable
State notes and primary sources
Covered tax years: 2026 and 2027
Minnesota extended its elective PTET only through tax year 2027. The election cannot be made late and becomes irrevocable after the original due date.
Mississippi
ActiveVerified 2026-08-30
Rate and base
Mississippi individual income-tax rate for the filing year
Eligible entities
Partnerships, S corporations, Other eligible pass-through entities
Election
During the year, by the return due date, or with the filed return, whichever is later under current guidance · Form 84-381; more than 50% owner consent by default
Owner relief
Owner credit; current guidance addresses refund and carryforward treatment · Credit
State notes and primary sources
Covered tax years: 2026 and 2027
The election continues until revoked. Confirm current forms and rate before filing.
Missouri
ActiveVerified 2026-08-30
Rate and base
Highest Missouri individual income-tax rate for the filing year
Eligible entities
Partnerships, S corporations
Election
Follow the filing-year SALT Parity Act return procedure · Annual election on the applicable Missouri entity filing · Annual election
Owner relief
Pro rata nonrefundable owner credit · Credit · Unlimited carryforward
State notes and primary sources
Covered tax years: 2026 and 2027
The owner credit is nontransferable. Confirm the current top rate and election deadline on the filing-year form.
Montana
ActiveVerified 2026-08-30
Rate and base
5.65% for 2026; 5.4% for 2027
Eligible entities
Partnerships, S corporations
Election
With a timely Form PTE, including extensions (September 15 for a calendar-year entity) · Election on Form PTE · Annual election
Owner relief
Fully refundable owner credit · Credit · 100% refundable
State notes and primary sources
Covered tax years: 2026 and 2027
Estimated payments: Required when expected liability exceeds $500; calendar-year installments generally April 15, June 15, September 15, and January 15.
Tax is generally due by the original March 15 return date even though the election can be made by the extended due date.
Filing-year confirmation: Entity eligibility can require judgment where an S corporation has instruments that may be treated as a second class of stock.
Nebraska
ActiveVerified 2026-08-30
Rate and base
4.55% for 2026; 3.99% for 2027 and later years
Eligible entities
Partnerships, S corporations, Eligible pass-through entities
Election
With Form PTET-E or the timely entity return, including extensions · Election form or election checkbox under current instructions · Annual election
Owner relief
Owner credit after the entity pays Nebraska PTET · Credit
State notes and primary sources
Covered tax years: 2026 and 2027
Estimated payments: Generally required when expected liability is $400 or more.
The election is irrevocable for the elected year.
New Jersey
ActiveVerified 2026-08-30
Rate and base
Graduated: 5.675% through $250,000; 6.52% from $250,000 to $1 million; 10.9% above $1 million
Eligible entities
Partnerships, S corporations, LLCs taxed as either
Election
Electronic election with the original PTE-100 by March 15 for a calendar-year entity · Electronic BAIT return · Annual election
Owner relief
Refundable owner credit under BAIT rules · Credit · Refundable
State notes and primary sources
Covered tax years: 2026 and 2027
Estimated payments: Generally required when expected liability exceeds $400; April 15, June 15, September 15, and January 15 for calendar-year filers.
The graduated rate is applied to the distributive proceeds tax base under New Jersey BAIT rules.
New Mexico
ActiveVerified 2026-08-30
Rate and base
Higher of the applicable personal or corporate income-tax rate; currently 5.9% maximum
Eligible entities
Partnerships, S corporations
Election
With the entity return · Election on the New Mexico PTE filing · Annual election
Owner relief
Owner credit reported under New Mexico PTE procedures · Credit
State notes and primary sources
Covered tax years: 2026 and 2027
The election is irrevocable once made and applies to all owners for the year. Confirm excess-credit treatment in the filing-year owner instructions.
Filing-year confirmation: A current primary statement on universal refundability of excess owner credits was not located.
New York
ActiveVerified 2026-08-30
Rate and base
Graduated: 6.85% through $2 million; 9.65%, 10.30%, and 10.90% at higher PTET bases
Eligible entities
Partnerships, New York S corporations
Election
January 1 through March 15 of the tax year · Online Services election by an authorized person · Annual election
Owner relief
Fully refundable owner credit · Credit · 100% refundable
State notes and primary sources
Covered tax years: 2026 and 2027
Estimated payments: Generally due March 15, June 15, September 15, and December 15.
The annual election is irrevocable after the first estimated-payment due date. The PTET return is generally due March 15 after year-end.
Nested local programs
New York City PTET
Rate: 3.876%
Election: Same January 1-March 15 period as the New York State election · Requires a valid New York State PTET election · Annual election
Owner relief: Fully refundable NYC owner credit · Credit · 100% refundable
North Carolina
ActiveVerified 2026-08-30
Rate and base
North Carolina individual income-tax rate for the filing year
Eligible entities
Partnerships, S corporations, Eligible LLCs taxed as either
Election
With a timely entity return, including extensions · Election on the North Carolina entity return · Annual election
Owner relief
Owner deduction/exclusion for income taxed at the entity level; not a credit · Exclusion
State notes and primary sources
Covered tax years: 2026 and 2027
Estimated payments: Generally required when expected liability is $500 or more; calendar-year installments April 15, June 15, September 15, and December 15.
The calendar-year return is generally due April 15. Statutory entity and owner exclusions can affect eligibility.
Ohio
ActiveVerified 2026-08-30
Rate and base
3% of qualifying taxable income
Eligible entities
Partnerships, S corporations, Qualifying pass-through entities
Election
With timely Form IT 4738 · Election on Form IT 4738 · Annual election
Owner relief
Refundable owner credit · Credit · Refundable
State notes and primary sources
Covered tax years: 2026 and 2027
Estimated payments: Generally due April 15, June 15, September 15, and January 15.
The election is irrevocable for the year. A calendar-year Form IT 4738 is generally due April 15.
Oklahoma
ActiveVerified 2026-08-30
Rate and base
Applicable Oklahoma individual or corporate rate based on owner class; confirm current instructions
Eligible entities
Partnerships, S corporations
Election
Generally by the 15th day of the third month after the tax year begins, or with a timely original return under the post-2023 procedure · Form 586, OkTAP, or filing-year return procedure
Owner relief
Owner excludes income included in the entity-level tax base · Exclusion
State notes and primary sources
Covered tax years: 2026 and 2027
The election continues until revoked; revocation generally follows the same early-year deadline.
Filing-year confirmation: Because the rate can depend on owner classification, the entity computation requires filing-year form review.
Oregon
ExpiredVerified 2026-08-30
Rate and base
No elective PTE tax for tax years beginning in 2026 or 2027
Eligible entities
Formerly eligible partnerships and S corporations
Election
Program ended for tax years beginning after 2025 · No 2026/2027 election available
Owner relief
No 2026/2027 elective PTE credit · Unavailable
State notes and primary sources
Covered tax years: Tax years beginning before January 1, 2026 only
Oregon’s elective PTE tax was limited to tax years beginning before January 1, 2026.
Rhode Island
ActiveVerified 2026-08-30
Rate and base
5.99%
Eligible entities
Partnerships, S corporations, Eligible pass-through entities
Election
With the entity return and Schedule PTE under current instructions · Election through the Rhode Island entity filing · Annual election
Owner relief
Owner credit equal to 90% of allocated PTET under post-2024 rules · Credit · 90% of allocated PTET
State notes and primary sources
Covered tax years: 2026 and 2027
Owners add back the deducted entity tax as required by Rhode Island instructions. Confirm whether an excess credit is refundable for the specific owner and form.
Filing-year confirmation: The current source did not support a universal refundability label for every owner class.
South Carolina
ActiveVerified 2026-08-30
Rate and base
3% of active trade or business income included in the election
Eligible entities
Partnerships, S corporations
Election
By the entity return due date, including extensions · Election on the South Carolina entity return · Annual election
Owner relief
Owner excludes income taxed at the entity level; no separate PTET credit · Exclusion
State notes and primary sources
Covered tax years: 2026 and 2027
Only qualifying active trade or business income is included. Passive and other categories require separate analysis.
Utah
ActiveVerified 2026-08-30
Rate and base
Utah individual income-tax rate for the filing year
Eligible entities
Partnerships, S corporations, Qualifying pass-through entities
Election
Last day of the entity tax year · Electronic Form TC-75 plus full payment · Annual election
Owner relief
Nonrefundable owner credit · Credit · 10-year carryforward
State notes and primary sources
Covered tax years: 2026 and 2027
The election is irrevocable. The election payment cannot be refunded or reduced, and there is no quarterly installment schedule for the election itself.
Filing-year confirmation: Refresh the exact Utah income-tax rate from filing-year official guidance before publication.
Virginia
ActiveVerified 2026-08-30
Rate and base
5.75%
Eligible entities
Partnerships, S corporations, Qualifying pass-through entities
Election
With the electronic Form 502PTET under filing-year instructions · Annual election on the PTET return · Annual election
Owner relief
Refundable owner credit · Credit · Refundable
State notes and primary sources
Covered tax years: 2026 and 2027
Estimated payments: Quarterly estimated payments apply under Virginia PTET procedures.
Virginia made the elective regime permanent. Confirm the calendar-year filing and extension dates in the current Form 502PTET instructions.
West Virginia
ActiveVerified 2026-08-30
Rate and base
Top West Virginia individual income-tax rate for the filing year
Eligible entities
Partnerships, S corporations, Qualifying pass-through entities
Election
With Form EPT-100; generally March 15 for a calendar-year entity · Annual election on Form EPT-100 · Annual election
Owner relief
Owner credit reported from Schedule EK-1 · Credit
State notes and primary sources
Covered tax years: 2026 and 2027
Estimated payments: Calendar-year installments generally April 15, June 15, September 15, and January 15.
The annual election is irrevocable. Confirm the current top rate and excess-credit treatment in the filing-year instructions.
Filing-year confirmation: The exact 2026/2027 top rate and universal refundability of excess owner credits need filing-year confirmation.
Wisconsin
ActiveVerified 2026-08-30
Rate and base
7.9%
Eligible entities
Partnerships, S corporations
Election
On the timely entity return, including extensions · Election on Schedule 3-ET or Schedule 5S-ET; more than 50% owner consent · Annual election
Owner relief
Owner excludes income taxed at the entity level; no separate credit · Exclusion
State notes and primary sources
Covered tax years: 2026 and 2027
The election may generally be amended or revoked through the extended due date under the current instructions.
Model the interaction
PTET can shrink QBI while increasing the federal state-tax deduction
Because the entity-level tax reduces pass-through business income, it generally reduces the qualified business income used for the Section 199A deduction. For an otherwise eligible owner receiving a 20% QBI deduction, each $10,000 of deductible PTET can reduce tentative QBI deduction by up to $2,000 before other limits. The trade can still be favorable, but use the net federal and state result.
| Entity-level PTET paid | $10,000 |
| Federal deduction before QBI interaction | $10,000 |
| Illustrative QBI reduction at 20% | ($2,000) |
| Net federal deduction base before other effects | $8,000 |
Simplified illustration only. It assumes the owner otherwise receives a full 20% QBI deduction and ignores taxable-income, wage/UBIA, SSTB, basis, loss, state, and timing effects.
The six-point PTET election screen
Entity eligible?
Confirm entity type, owners, and state-specific exclusions. A disregarded single-member LLC often cannot elect without a different tax classification.
Election available for 2026?
Check the state’s current statute, sunset, and filing-year instructions. Several regimes changed or expired around 2025 and 2026.
Election made on time?
Deadlines and payment prerequisites vary. Some elections are irrevocable after the due date or require estimates before the return.
Owner receives usable relief?
Model resident credit, nonresident credit, refundability, carryforward, addback, and owner-level inclusion.
Federal deduction creates net value?
Compare the federal benefit with reduced QBI, state credit haircut, cash timing, added compliance, and entity-owner mismatches.
Books and returns reconcile?
Entity payment, federal deduction, state addback, K-1 information, and owner credit should trace through one workpaper.
Election and payment deadlines are state-specific
Do not copy another state’s date. A regime may require a separate election, an election on the entity return, quarterly estimates, an early-year prepayment, owner consent, or payment by a specified date to preserve the federal deduction year. Late-election relief is not uniform.
Before year starts
Confirm entity/owner eligibility, expected source income, and state residency mix.
Before each estimate
Reforecast tax base, owners, apportionment, credits, and cash.
Before the election cutoff
Document authorization and verify that required payments have cleared.
Before federal filing
Reconcile books, deduction year, K-1 information, owner credits, and resident-credit positions.
How elections actually get blown
The same five failures account for nearly every broken PTET year we are asked to clean up:
- The missed prerequisite payment. Some regimes condition the election on a mid-year prepayment (California's June payment is the famous one). Miss it and discovering the problem in December is too late for that year.
- The missed election window. Annual-election states (New York's early-year window is the classic) do not accept the intention to elect; entities that never filed the election get no deduction no matter what they paid.
- Paying personal estimates as if PTET did not exist. The owner keeps full personal estimates running alongside entity PTET payments, doubling cash out the door and tangling the credit reconciliation at filing.
- Deduction-year mismatch on cash-basis entities. When the entity pays controls when the federal deduction lands; December versus January payments move real money for cash-basis S corps.
- Multi-state entities electing in one state and forgetting composite or withholding obligations in the others. The PTET fix in the home state does not switch off nonresident mechanics elsewhere.
Cleanup options exist for some of these (amended elections where a state allows them, deduction-year corrections, credit reconciliations), but every one of them is cheaper as a calendar entry than as a project. This is the core of what a year-round engagement does for PTET owners: the deadlines live on our calendar, not the client's memory.
Frequently asked questions
What is a PTET deduction?
A state pass-through entity tax lets an eligible partnership or S corporation pay state income tax at the entity level. Under IRS Notice 2020-75, qualifying entity-level payments may be deducted in computing federal taxable income and are not treated as the owners’ capped Schedule A SALT deduction.
Does every state offer a PTET election?
No. Availability, tax years, entity eligibility, and owner relief vary by jurisdiction, and some regimes have expired or changed. Use the source-linked 2026 state tracker on this page, then confirm the current filing-year instructions before electing or paying.
Does a single-member LLC qualify for PTET?
A disregarded single-member LLC usually is not an eligible pass-through entity by itself, although an LLC taxed as an S corporation or partnership may qualify if the state permits it. Entity classification and state owner restrictions control.
Does PTET reduce the QBI deduction?
An entity-level PTET deduction generally reduces the pass-through income used in the owner’s QBI calculation, so part of the federal SALT benefit may be offset by a smaller Section 199A deduction. The net result should be modeled, not assumed.
Is the owner credit always refundable?
No. State owner relief may be refundable, nonrefundable, carried forward, or provided as an income exclusion. Credit percentages and treatment of resident and nonresident owners vary by state.
Is PTET still useful after the SALT cap increased?
It can be, especially when an owner’s personal SALT taxes exceed the applicable cap or the higher cap is reduced by the income phaseout. But PTET can be neutral or harmful when owner credits are limited, QBI is reduced, cash timing is poor, or compliance costs consume the benefit.
Primary sources
Make the election from a net-benefit model
Taxstra can model the federal deduction, QBI reduction, owner credits, residency, estimates, cash timing, and state filing requirements before the election becomes irreversible.
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