ecomcpa.com | July 2026 | Estimated read: 6 minutes
For seven years the state and local tax deduction was capped at 10,000 dollars, and pass-through business owners found a workaround: the pass-through entity tax, or PTET. Your business pays your state income tax at the entity level, deducts it in full against federal income, and sidesteps the personal cap entirely.
Then OBBBA raised the personal cap to 40,000 dollars. For 2026 it is 40,400. That is a big jump, and it has some founders wondering whether the PTET workaround still matters. For a lot of ecommerce owners, it very much does. For others, the answer flipped. The point is that the answer changed, and if you set up a PTET election two years ago and have not looked at it since, you are running on stale math.
What actually changed
OBBBA raised the SALT deduction cap from 10,000 to 40,000 dollars starting in tax year 2025. For 2026 the cap is 40,400, and it grows 1 percent a year through 2029. In 2030 it reverts to 10,000 dollars unless Congress acts again. So the relief is real, but it has a clock on it.
There is also a phaseout for higher earners. Once your modified adjusted gross income passes 500,000 dollars, the benefit shrinks by 30 cents for every dollar over the threshold. The deduction never falls below the old 10,000 floor, but the expanded cap erodes fast for successful founders. Do the arithmetic and the extra headroom is fully phased out at a MAGI around 606,000 dollars. Above that line, your personal SALT deduction is right back at 10,000 dollars, exactly where it sat before OBBBA.
Why PTET still wins for most profitable brands
Here is the key thing the raised cap does not change: PTET is a deduction taken by your business, above the line, before the personal cap or the phaseout ever enters the picture.
When your S-corp or partnership pays state income tax through a PTET election, the full amount reduces the federal income that flows to your K-1. There is no 40,400 ceiling on it. There is no MAGI phaseout on it. If your brand throws off enough profit that your state tax bill runs well past 40,000 dollars, PTET still lets you deduct all of it federally, and the personal cap only ever touches your remaining personal state taxes like property tax.
For the founder above roughly 606,000 dollars of MAGI, PTET is not just better, it is the only mechanism left. At that income your personal SALT deduction is capped at 10,000 dollars no matter what. The entity-level deduction is the whole game.
When the raised cap might be enough on its own
Not every seller needs the workaround anymore, and that is the genuinely new part of this analysis.
Picture a founder with a modest but real brand, state income tax around 18,000 dollars, property tax around 12,000, and MAGI comfortably under 500,000. Total SALT is 30,000 dollars, and the 40,400 cap now absorbs all of it on the personal return. For that person the PTET election adds paperwork, a separate entity-level payment, timing headaches, and in some states a filing fee, to solve a problem the higher cap already solved.
PTET regimes also vary by state. Some are clean and clearly worth it. Others have quirks in how they handle nonresident owners, credit mechanics, or the timing of the entity payment that can eat into the benefit. If the raised cap already covers your whole SALT bill, the workaround may be complexity you no longer need to carry.
The 2030 cliff nobody is pricing in
The expanded cap is temporary. In 2030 it snaps back to 10,000 dollars. The PTET workaround, by contrast, has no expiration date written into it.
That matters for how you think about tearing down an election. If you are a founder whose SALT bill sits just under the current cap, it is tempting to drop PTET for simplicity. Before you do, remember you may want it back in four years when the cap collapses. Keeping a working election in place, even in a year it saves you little, can be cheaper than unwinding it and rebuilding it later. This is a multi-year decision, not a this-April decision.
What to do this year
Pull three numbers: your expected state income tax, your other state and local taxes like property tax, and your projected MAGI. If your state income tax alone runs past 40,000 dollars, or your MAGI is heading toward 500,000, PTET almost certainly still pays and you should confirm your election is active and your estimated entity payments are on schedule.
If you are a smaller brand well under the phaseout with total SALT under 40,000 dollars, run the comparison honestly. The workaround may no longer earn its keep, though the 2030 reversion is a reason to think twice before abandoning it.
Most states require the PTET election and payment during the tax year, not at filing. Waiting until you do your return in the spring is often too late to elect for this year. If you are going to change course, mid-year is when to decide.
This article is general information, not tax advice. PTET rules, election deadlines, and phaseout figures vary by state and by your full financial picture. Talk to your CPA before making or dropping a PTET election. EcomCPA helps ecommerce founders structure entity-level tax elections around real numbers.
